scholarly journals The Performance of Skewness and Kurtosis Adjusted Option Pricing Model in Emerging Markets

2016 ◽  
Vol 5 (3) ◽  
pp. 70-84
Author(s):  
Özge Sezgin Alp
Keyword(s):  
Emerging Markets ◽  
Option Pricing ◽  
Option Prices ◽  
Pricing Model ◽  
European Options ◽  
Black Scholes Model ◽  
Black Scholes ◽  
Option Pricing Model ◽  
Skewness And Kurtosis ◽  
Pricing Formula

In this study, the option pricing performance of the adjusted Black-Scholes model proposed by Corrado and Su (1996) and corrected by Brown and Robinson (2002), is investigated and compared with original Black Scholes pricing model for the Turkish derivatives market. The data consist of the European options written on BIST 30 index extends from January 02, 2015 to April 24, 2015 for given exercise prices with maturity April 30, 2015. In this period, the strike prices are ranging from 86 to 124. To compare the models, the implied parameters are derived by minimizing the sum of squared deviations between the observed and theoretical option prices. The implied distribution of BIST 30 index does not significantly deviate from normal distribution. In addition, pricing performance of Black Scholes model performs better in most of the time. Black Scholes pricing Formula, Carrado-Su pricing Formula, Implied Parameters

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 A modification term for Black-Scholes model based on discrepancy calibrated with real market data

2021 ◽  
Vol 1 (4) ◽  
pp. 313-326
Author(s):  
Xiaozheng Lin ◽  
◽  
Meiqing Wang ◽  
Choi-Hong Lai ◽  
Keyword(s):  
Option Pricing ◽  
Implied Volatility ◽  
Option Prices ◽  
Market Prices ◽  
Market Data ◽  
Black Scholes Model ◽  
Black Scholes ◽  
Option Pricing Model ◽  
Real Market ◽  
S Model

<abstract><p>The Black-Scholes option pricing model (B-S model) generally requires the assumption that the volatility of the underlying asset be a piecewise constant. However, empirical analysis shows that there are discrepancies between the option prices obtained from the B-S model and the market prices. Most current modifications to the B-S model rely on modelling the implied volatility or interest rate. In contrast to the existing modifications to the Black-Scholes model, this paper proposes the concept of including a modification term to the B-S model itself. Using the actual discrepancies of the results of the Black-Scholes model and the market prices, the modification term related to the implied volatility is derived. Experimental results show that the modified model produces a better option pricing results when compare to market data.</p></abstract>

scholarly journals Simple Heuristic Approach To Introduction Of The Black-Scholes Model

2010 ◽  
Vol 3 (2) ◽  
pp. 31-42
Author(s):  
Rossitsa Yalamova
Keyword(s):  
Option Pricing ◽  
Protocol Analysis ◽  
Heuristic Approach ◽  
Probability Measures ◽  
Pricing Model ◽  
Black Scholes Model ◽  
Visual Illustration ◽  
Black Scholes ◽  
Option Pricing Model ◽  
The Relationship

A heuristic approach to explaining of the Black-Scholes option pricing model in undergraduate classes is described. The approach draws upon the method of protocol analysis to encourage students to `think aloud' so that their mental models can be surfaced. It also relies upon extensive visualizations to communicate relationships that are otherwise inaccessible at the average student's level of mathematical sophistication. This paper presents visual illustration of the changes in the probability measures with concrete examples breaking the option premium into four different components. The relationship between changes in variables and those components are graphically and algebraically illustrated.

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).

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

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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