Predicting the stock price of frontier markets using machine learning and modified Black–Scholes Option pricing model

2020 ◽  
Vol 555 ◽  
pp. 124444 ◽  
Author(s):  
Reaz Chowdhury ◽  
M.R.C. Mahdy ◽  
Tanisha Nourin Alam ◽  
Golam Dastegir Al Quaderi ◽  
M. Arifur Rahman
Keyword(s):  
Machine Learning ◽  
Option Pricing ◽  
Stock Price ◽  
Pricing Model ◽  
Black Scholes ◽  
Option Pricing Model

scholarly journals Valuing Coca-Cola And PepsiCo Options Using The Black-Scholes Option Pricing Model And Data Downloads From The Internet

2012 ◽  
Vol 8 (6) ◽  
pp. 559-564
Author(s):  
John C. Gardner ◽  
Carl B. McGowan Jr
Keyword(s):  
Option Pricing ◽  
Stock Price ◽  
Option Price ◽  
Option Prices ◽  
Pricing Model ◽  
Black Scholes ◽  
Option Pricing Model ◽  
Risk Free Rate ◽  
Daily Returns ◽  
Free Rate

In this paper, we demonstrate how to collect the data and compute the actual value of Black-Scholes Option Pricing Model call option prices for Coca-Cola and PepsiCo.The data for the current stock price and option price are taken from Yahoo Finance and the daily returns variance is computed from daily prices.The time to maturity is computed as the number of days remaining for the stock option.The risk-free rate is obtained from the U.S. Treasury website.

scholarly journals Shariah Issue of Warrant Contract: Empirical Evidence from Warrant Mispricing in Malaysia Market

2015 ◽  
Vol 1 (1) ◽  
pp. 041
Author(s):  
Ibnu Qizam ◽  
Misnen Ardiansyah ◽  
Razali Haron
Keyword(s):  
Regression Analysis ◽  
Option Pricing ◽  
Empirical Evidence ◽  
Stock Price ◽  
Panel Regression ◽  
Pricing Model ◽  
Black Scholes ◽  
Option Pricing Model

The objective of this paper is to analyze the gharar issue of warrant by presenting the empirical evidence of warrant mispricing in Malaysia's market (moneyness and mispricing) and its determinant. The Black Scholes Option Pricing Model (BSOPM) will be used to detect mispricing in a warrant's contract. In addition panel regression will be performed to analyze the determinant if said warrant is mispriced. The result shows that in majority, mispricing happens in warrant, either by Out the Money, or In the Money. Panel regression analysis finds that Stock price, klibor, and maturity are positive and are significant variables to the mispricing of a warrant. Finally, with the use of a warrant mispricing model, this research concludes that there is gharar issue in warrant contract.

scholarly journals Good Volatility, Bad Volatility, and Option Pricing

2018 ◽  
Vol 54 (2) ◽  
pp. 695-727 ◽  
Author(s):  
Bruno Feunou ◽  
Cédric Okou
Keyword(s):  
Option Pricing ◽  
Stock Price ◽  
Asset Price ◽  
Jump Diffusion ◽  
Quadratic Variation ◽  
Pricing Model ◽  
Economic Gain ◽  
Underlying Asset ◽  
Model Free ◽  
Option Pricing Model

Advances in variance analysis permit the splitting of the total quadratic variation of a jump-diffusion process into upside and downside components. Recent studies establish that this decomposition enhances volatility predictions and highlight the upside/downside variance spread as a driver of the asymmetry in stock price distributions. To appraise the economic gain of this decomposition, we design a new and flexible option pricing model in which the underlying asset price exhibits distinct upside and downside semivariance dynamics driven by the model-free proxies of the variances. The new model outperforms common benchmarks, especially the alternative that splits the quadratic variation into diffusive and jump components.

scholarly journals Empirical Performance of Black-Scholes and GARCH Option Pricing Models during Turbulent Times: The Indian Evidence

2016 ◽  
Vol 8 (3) ◽  
pp. 123
Author(s):  
Aparna Bhat ◽  
Kirti Arekar
Keyword(s):  
Option Pricing ◽  
Closed Form Solution ◽  
Time Varying ◽  
Pricing Model ◽  
Currency Options ◽  
Pricing Models ◽  
Pricing Options ◽  
Volatility Model ◽  
Black Scholes ◽  
Option Pricing Model

Exchange-traded currency options are a recent innovation in the Indian financial market and their pricing is as yet unexplored. The objective of this research paper is to empirically compare the pricing performance of two well-known option pricing models – the Black-Scholes-Merton Option Pricing Model (BSM) and Duan’s NGARCH option pricing model – for pricing exchange-traded currency options on the US dollar-Indian rupee during a recent turbulent period. The BSM is known to systematically misprice options on the same underlying asset but with different strike prices and maturities resulting in the phenomenon of the ‘volatility smile’. This bias of the BSM results from its assumption of a constant volatility over the option’s life. The NGARCH option pricing model developed by Duan is an attempt to incorporate time-varying volatility in pricing options. It is a deterministic volatility model which has no closed-form solution and therefore requires numerical techniques for evaluation. In this paper we have compared the pricing performance and examined the pricing bias of both models during a recent period of volatility in the Indian foreign exchange market. Contrary to our expectations the pricing performance of the more sophisticated NGARCH pricing model is inferior to that of the relatively simple BSM model. However orthogonality tests demonstrate that the NGARCH model is free of the strike price and maturity biases associated with the BSM. We conclude that the deterministic BSM does a better job of pricing options than the more advanced time-varying volatility model based on GARCH.

scholarly journals Nonparametric Estimation of Fractional Option Pricing Model

2020 ◽  
Vol 2020 ◽  
pp. 1-8
Author(s):  
Qing Li ◽  
Songlin Liu ◽  
Misi Zhou
Keyword(s):  
Option Pricing ◽  
Stock Exchange ◽  
Option Price ◽  
Integral Function ◽  
The State ◽  
Pricing Model ◽  
State Price ◽  
Black Scholes ◽  
Option Pricing Model ◽  
State Price Density

The establishment of the fractional Black–Scholes option pricing model is under a major condition with the normal distribution for the state price density (SPD) function. However, the fractional Brownian motion is deemed to not be martingale with a long memory effect of the underlying asset, so that the estimation of the state price density (SPD) function is far from simple. This paper proposes a convenient approach to get the fractional option pricing model by changing variables. Further, the option price is transformed as the integral function of the cumulative density function (CDF), so it is not necessary to estimate the distribution function individually by complex approaches. Finally, it encourages to estimate the fractional option pricing model by the way of nonparametric regression and makes empirical analysis with the traded 50 ETF option data in Shanghai Stock Exchange (SSE).

Black-Scholes Option Pricing Model

2012 ◽  
Author(s):  
Svetlozar T. Rachev ◽  
Christian Menn ◽  
Frank J. Fabozzi
Keyword(s):  
Option Pricing ◽  
Pricing Model ◽  
Black Scholes ◽  
Option Pricing Model
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