Applicability of Black Scholes model on Nifty 50 call options

2019 ◽  
Vol 10 (4) ◽  
pp. 319
Author(s):  
Amit Garg
Keyword(s):  
Call Options ◽  
Black Scholes Model ◽  
Black Scholes

scholarly journals An Asymptotic Solution for Call Options on Zero-Coupon Bonds

Mathematics ◽  
2021 ◽  
Vol 9 (16) ◽  
pp. 1940
Author(s):  
Michael J. Tomas Tomas III ◽  
Jun Yu
Keyword(s):  
Stochastic Process ◽  
Asymptotic Solution ◽  
Interest Rates ◽  
Perturbation Approach ◽  
Return Volatility ◽  
Leading Order ◽  
Bond Price ◽  
Call Options ◽  
Black Scholes Model ◽  
Black Scholes

We present an asymptotic solution for call options on zero-coupon bonds, assuming a stochastic process for the price of the bond, rather than for interest rates in general. The stochastic process for the bond price incorporates dampening of the price return volatility based on the maturity of the bond. We derive the PDE in a similar way to Black and Scholes. Using a perturbation approach, we derive an asymptotic solution for the value of a call option. The result is interesting, as the leading order terms are equivalent to the Black–Scholes model and the additional next order terms provide an adjustment to Black–Scholes that results from the stochastic process for the price of the bond. In addition, based on the asymptotic solution, we derive delta, gamma, vega and theta solutions. We present some comparison values for the solution and the Greeks.

scholarly journals Black-Scholes Model in Determining European Option Prices on Netflix,Inc.

d'CARTESIAN ◽  
2019 ◽  
Vol 8 (2) ◽  
pp. 80
Author(s):  
Desty A. Tambingon ◽  
Jullia Titaley ◽  
Tohap Manurung
Keyword(s):  
Share Price ◽  
Option Prices ◽  
European Option ◽  
Put Options ◽  
Call Options ◽  
Price Data ◽  
Black Scholes Model ◽  
Black Scholes

Research has been conducted to compare the prices of European option on the Yahoo Finance website with prices obtained from the Black-Scholes model (theoretical price). Data was taken on January 31, 2019 which included the daily share price of Netflix, Inc. (NFLX) on February 14, 2018 - January 31, 2019 to obtain volatility, and NFLX options data due on January 17, 2020. Options with prices lower than theoretical prices are said to be underpriced, so the decision taken is to buy the options. Whereas options with prices higher than theoretical prices are said to be overpriced, so it has to be reconsidered. The proportion of the underpriced call options for the total number of call options is 77.7778%, while the proportion of the underpriced put options for the total number of put options is 38.5714%.

scholarly journals OPTIONS WRITTEN ON STOCKS WITH KNOWN DIVIDENDS

2004 ◽  
Vol 07 (07) ◽  
pp. 901-907
Author(s):  
ERIK EKSTRÖM ◽  
JOHAN TYSK
Keyword(s):  
Stock Price ◽  
Option Price ◽  
Option Prices ◽  
Strike Price ◽  
Call Options ◽  
Alternative Approach ◽  
Black Scholes ◽  
Market Practice ◽  
The Difference ◽  
Risk Free Rate

There are two common methods for pricing European call options on a stock with known dividends. The market practice is to use the Black–Scholes formula with the stock price reduced by the present value of the dividends. An alternative approach is to increase the strike price with the dividends compounded to expiry at the risk-free rate. These methods correspond to different stock price models and thus in general give different option prices. In the present paper we generalize these methods to time- and level-dependent volatilities and to arbitrary contract functions. We show, for convex contract functions and under very general conditions on the volatility, that the method which is market practice gives the lower option price. For call options and some other common contracts we find bounds for the difference between the two prices in the case of constant volatility.

Sign in / Sign up

Export Citation Format

Share Document