Plz explain q4 ka 1
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The interest rate is not constant in real life, it keeps on changing but BSM assumes constant risk free rate, which is a limitation as Bond prices are interest rate sensitive so we can’t use BSM for options on bond prices and interest rate.
Are ye answer to book main likha hi hai
Jab equity ke option ko price karte tab bhi to constant rf assume karte hai aise to vo bhi sahi nahi hai