All termsOption Pricing and ValueStart here
Option Pricing Model
An option pricing model is a mathematical framework used to estimate an option's theoretical value based on assumptions and inputs such as the underlying price, strike, time to expiration, volatility and interest rates.
Why it matters to you
Pricing models help traders understand how different variables affect option value. They also underpin much of the language used in options markets, including theoretical prices and Greeks.
Terms that sit next to this one
Binomial Model, Greeks