Recently a new class of calibrated blood oxygen level dependent (BOLD) functional magnetic resonance imaging (MRI) methods were introduced to quantitatively measure the baseline oxygen extraction fraction (OEF). These methods rely on two respiratory challenges and a mathematical model of the resultant changes in the BOLD functional MRI signal to estimate the OEF. However, this mathematical model does not include all of the effects that contribute to the BOLD signal, it relies on several physiological assumptions and it may be affected by intersubject physiological variability. The aim of this study was to investigate these sources of systematic error and their effect on estimating the OEF. This was achieved through simulation using a detailed model of the BOLD signal. Large ranges for intersubject variability in baseline physiological parameters such as haematocrit and cerebral blood volume were considered. Despite this the uncertainty in the relationship between the measured BOLD signals and the OEF was relatively low. Investigations of the physiological assumptions that underlie the mathematical model revealed that OEF measurements are likely to be overestimated if oxygen metabolism changes during hypercapnia or cerebral blood flow changes under hyperoxia. Hypoxic hypoxia was predicted to result in an underestimation of the OEF, whilst anaemic hypoxia was found to have only a minimal effect.