Improved Black–Scholes and binomial options pricing models

The Black–Scholes model and the more general binomial options pricing models are a collection of equations that seek to model and price equity and call options. While the models are widely used, they have many significant limitations. Chief among them are the model's inability to account for historical market movements and their frequent overpricing of options, with the overpricing increasing with the time to maturity. The development of a model that can properly account for the pricing of call options on an asset with stochastic volatility is considered an open problem in financial economics.

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Source: List of unsolved problems in economics (CC BY-SA 4.0)