The option pricing model is one of the most important breakthroughs in modern finance. There are several reasons why the study of options is important. First, options are useful to financial managers as risk management tools since they are used for reducing risks. Second, they provide a new way of thinking about valuation problems and are useful in solving complex problems. Third, options are embedded in many capital investment projects and not recognizing them would render project analysis not only incomplete and but may also lead to erroneous decisions. Lastly, they provide financial managers flexibility that no other financial instrument can provide. This is a very interesting but difficult topic.
