Why does the strategy evaluation tool include Black-Scholes if the binomial tool handles all situations?
Including the Black-Scholes model lets you compare results with those provided by the binomial tool. However, even if you don’t explicitly choose to use the Black-Scholes method of pricing it is still used extensively by the tool for producing time-lines on the pay-off diagrams, as it is much faster than the binomial tool. This is because Black-Scholes is an analytical formula, which produces an accurate result in a couple of lines of code, whereas the binomial method is a numerical tool based on iterating through a large number of steps. For more information on the approach to pricing see the section on Option Pricing Models.
