Option pricing refers to the process of determining the value of a financial contract called an "option." An option gives the holder the right, but not the obligation, to buy or sell an asset (like stocks or commodities) at a fixed price within a specific timeframe.
Option pricing involves assessing factors such as the current price of the asset, the volatility of its price, and the time remaining until the option expires. By calculating these variables,
option pricing helps investors determine the fair price for buying or selling options and making informed decisions about their investments.
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