Further Reflections Based on the Black–Scholes (B-S) Model

Abstract The Black–Scholes (B-S) model is considered by the academic environment one of the greatest achievements of financial economics. Yet it brings with it some conundrums. The model is often used in a manner that contradicts one of its assumptions, and its predictions are not supported by market reality. Here we address, from the perspective of philosophy of science, an additional issue related to this model: the distinction between its explanatory and predictive capabilities.