17. Why Black-Scholes formula is adopted by Option Panda for option pricing?
Besides Black-Scholes formula, there are also many other financial models for option pricing, such as Binomial model, GARCH model etc. However, those alternative option pricing models are not as elegant as Black-Scholes model. Most importantly, Black-Scholes formula is widely used by major cryptocurrency option trading platforms(Deribit, Binance, Okex etc.) for option pricing. If we use the same methodology for option pricing, users could easily arbitrage among different trading exchanges, which creates a benefit to users.
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