Financial Risk Manager Part 1
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Which of the following assumptions is necessary for the Black-Scholes-Merton model to be used in pricing options?
A
The underlying asset does not pay any dividends during the life of the option.
B
The option under consideration cannot be an American option.
C
The execution of risk-free arbitrage opportunities is not possible.
D
The underlying asset's price at the end of a 1-year period will be normally distributed.