Limitations of the BSOP Model:

Assumption Limitations: The BSOP model relies on several assumptions that may not hold true in real-world situations. For example, markets may not always be perfectly efficient, transaction costs can exist, and interest rates may not remain constant.
European-Style Options: The BSOP model is primarily designed for valuing European-style options, which can only be exercised at expiration. It may not be as accurate for valuing American-style options, which can be exercised at any time before expiration.
Volatility Assumptions: The BSOP model assumes that volatility remains constant over the option’s life, which may not be realistic. In reality, volatility can change, affecting the accuracy of the model’s valuation.