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Models for Price Call Options

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Chose two different models used to price call options. Detail each model and focus on comparing and contrasting the models.

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Models for price call options are examined.

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Models of Pricing Call Options
There are some models used by the financial manager for pricing call options. These models are Black-Scholes model, Binominal model, The Delta etc. This tutorial considers two pricing model of call options that are discussed in detail as follow:
Black-Scholes Model: The Black-Scholes model is an effective method that is used to compute a hypothetical call price. It requires five key determinants for an option price that are volatility, stock price, time to expiration, strike price and short-term risk free interest rate. This model accepts constant volatility and European pricing that are exercised only at the maturity period of the call options (Brigham & Ehrhardt, 2010). The price of call options through this theoretical model can be computed with the following formula:
OP = SN (d1) - X e-r t N (d2)
In this d1 and d2 can ...

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