The Black-Scholes model, also known as the Black-Scholes-Merton model, is a mathematical model used to calculate the theoretical price of options. It considers the current price of the stock, the option’s strike price, time until expiration, risk-free interest rate, and volatility. The model assumes that markets are efficient and that returns are normally distributed.

– Reference: [Investopedia: Black-Scholes Model](https://www.investopedia.com/terms/b/blackscholes.asp)