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How are differential equations used in Economics and Financial markets?
How accurate is the Black-Scholes model?
While the Black-Scholes model is widely used, it is not always accurate because it is based on several assumptions that may not hold in real-world situations. For example, the model assumes that stock prices follow a lognormal distribution and that the market is efficient, among other things. However, modifications to the model have been proposed to account for these issues.