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Basic Question 4 of 12

The Black model suggests calculating the present value of the difference between the futures price and the exercise price to arrive at the value of a futures option. The futures price and exercise price are adjusted by ______.

A. N(d) functions
B. the continuously compounded risk-free rate
C. volatility

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Learning Outcome Statements

describe how the Black model is used to value European options on futures;

describe how the Black model is used to value European interest rate options and European swaptions;

CFA® 2025 Level II Curriculum, Volume 5, Module 32.