We use Black-76 model, which is a variant of the well known Black Scholes model. It is better suited for the Indian markets and is widely used by professional quants.
In this model, we:
- Assume no interest rate
- Assume no dividend etc
- Use Future Prices instead of Stock Prices for stock options
- Use Index Prices for index options
It is assumed that interest rate and dividends are accounted for in Future Prices.