According to the Black-Scholes model, when the risk-free rate increases, it results in a decrease in the value of a call option.

Black-Scholes

A mathematical model used to price European options, evaluating their potential value by factoring in volatility, asset price, time, and risk-free rate.

Risk-Free Rate

The theoretical rate of return on an investment with zero risk, often represented by the yield on government bonds.

Call Option

A financial contract giving the option buyer the right, but not the obligation, to buy a stock, bond, commodity, or other asset at a specified price within a specific time period.