Abstract
One of the most important concepts in modern finance practice and education is option pricing. The Black-Scholes model of option pricing is possibly the most commonly-used model. This paper presents an implementation of the Black-Scholes model of option pricing that includes graphs of the option value, the intrinsic value, and the time value. These graphs are dynamic, allowing the user to change the value of the volatility of underlying asset returns, time to maturity, and the risk-free rate. The user can also see how price of an option changes with movements in the underlying asset price. By illustrating both option prices and the components of option prices (intrinsic and time value) over a range of underlying asset prices, students can more easily visualize the effects of the drivers of option prices.
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