According to "Innovation Risk: How to Make Smarter Decisions", which of the following is NOT an observable external factor measured by the Black-Scholes formula?

B. the Dow Jones Industrial Average

Explanation:

The Black-Scholes formula is a pricing formula that is used in the financial markets in order to determine what the fair price or theoretical value of a stock option is. This formula uses six variables in order to determine this price, which are volatility, type of option, underlying stock price, time, strike price, and risk-free rate. Out of all the options listed in the question, the only one that is not an observable external factor is the Dow Jones Industrial Average which is not measured by the Black-Scholes formula.

Option B

Explanation:

Option B is not observable external factor measured by black scholar formula but it's an index used track companies on the new York stock exchange market.