Rubinstein (1994) observed that the performance of the Black-Scholes model had deteriorated in recent years, and he attributed this to

A) investor fears of another market crash.
B) higher-than-normal dividend payouts.
C) early exercise of American call options.
D) decreases in transaction costs.
E) None of the options are correct.

Black-Scholes Model

A mathematical model used to price European options, factoring in stock volatility and time to expiration.

Deteriorated Performance

A decline in the operational or financial outcomes of an individual, organization, system or asset.

American Call Options

Options that give the holder the right to buy an underlying asset at a certain price at any time before the expiration date.