Economists favored Black-Scholes-Merton for its minimal unobservable parameters and efficient-market grounding.

Evidence

Why might a participant in the options market in the 1970s have chosen to use Black’s sheets or another material implementation of the Black-ScholesMerton model? One factor could have been the authority of economics. Financial economists quickly came to see the Black-Scholes-Merton model as superior to its predecessors. It involved no non-observable parameters except for volatility, and it had a clear theoretical basis, one closely linked to the field’s dominant viewpoint: efficient-market theory. — Donald MacKenzie, An Engine, Not a Camera, 724

Categorization

• DEFINE: Clarifies the specific theoretical virtues (only volatility as unobservable; efficient-market linkage) that gave the model epistemic authority.
• XREF: connects to: Unobservable volatility means the Black-Scholes-Merton model has no unique predicted price. — Donald MacKenzie, An Engine, Not a Camera: How Financial…, 102

Broader Connections

• Unobservable volatility means the Black-Scholes-Merton model has no unique predicted price. #qualifies (0.80) — Donald MacKenzie, An Engine, Not a Camera, 102