Insight into Pricing Models for Options – CFA Level 1 Derivatives

Hello everyone,

I’m currently delving into the derivatives section of the CFA Level 1 and am particularly intrigued by the pricing models for options. I understand the basic concepts behind the Black-Scholes model and the Binomial model, but I’m curious about their practical applications and limitations in real-world scenarios.

Can anyone share their experiences or insights on how these models are used in contemporary financial settings? Specifically, how do firms reconcile the theoretical aspects of these models with market volatility and other real-world factors? Also, are there any common modifications or alternative models that practitioners prefer in certain situations?

I’m looking forward to learning from your experiences and thank you in advance for your insights!