Option Pricing
Inputs that shape call value and executable premium.
#Pricing inputs
| Input | Role |
|---|---|
| Spot / forward | Locates the underlying relative to strike |
| Strike | Defines the call's exercise boundary |
| Time | Defines how long the payoff distribution can evolve |
| Volatility | Prices the dispersion of future outcomes |
| Rates and distributions | Shape forward value and carrying economics |
| Liquidity and size | Determine executable spread and price impact |
#Model value and market price
A model maps assumptions to a theoretical value. An executable premium is a market price for a specific size and timestamp. Inventory, spreads and hedging cost can move that price away from a model estimate.
#Use models with labels
ARRANGE payoff mathematics does not require a single option-pricing model. Any quote or valuation should name its inputs, source and time rather than presenting a model output as observable fact.