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Journal articles on the topic 'Black–Scholes Option Pricing Model (OPM)'

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Published: 28 May 2022

Last updated: 31 July 2025

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1

PARTHASARATHY, V. R. PERRY. "Managing uncertainty: A case for using real options with option pricing model (OPM) to evaluate capital investment." TAPPI Journal 12, no. 7 (2013): 69–77. http://dx.doi.org/10.32964/tj12.7.69.

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The pulp and paper industry relies heavily on the traditional discounted cash flow-based net present value (DCF-NPV) for making capital investment decisions. The deficiency of the DCF-NPV model is that it is static; once a pattern of cash flow is established, management does not have the option to change the direction when new information is available. However, flexibility to alter the investment decision is a powerful strategic and capital investment tool. Abundant research has established strong precedence for applications of “real options” in operational and strategic settings to provide us

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2

Li, Chenwei. "A Study of Option Pricing Models with Market Price Adjustments: Empirical Analysis Beyond the Black-Scholes Model." Advances in Economics, Management and Political Sciences 137, no. 1 (2024): 94–98. https://doi.org/10.54254/2754-1169/2024.18702.

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In 1973, Fischer Black and Myron Scholes unveiled the Black-Scholes option pricing model, a groundbreaking contribution that profoundly influenced the domain of option pricing theory. The introduction of the Black-Scholes pricing formula has garnered substantial acclaim across both academic and industrial spheres, leading to its widespread dissemination and application. This formula not only underscores its vital significance but also exemplifies its unique position as a cornerstone of financial theory, reshaping how options are valued and traded in markets worldwide. However, in the real fina

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3

ZHAO, JINSHI, and JIAZHEN HUO. "COORDINATION MECHANISM COMBINING SUPPLY CHAIN OPTIMIZATION AND RULE IN EXCHANGE." Asia-Pacific Journal of Operational Research 30, no. 05 (2013): 1350015. http://dx.doi.org/10.1142/s0217595913500152.

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There are two kinds of option pricing. The option pricing in exchange follows the Black–Scholes rule but does not consider the optimizing of supply chain. The traditional supply chain option contract can optimize supply chain but does not meet the Black–Scholes rule. We integrate the assumption of above two kinds of option pricing, and design a model to combine the Black–Scholes rule and traditional option contract of optimizing in a supplier-led supply chain. Our combined model can guide the enterprises to write or buy option considering both option pricing rule in financial market and the op

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Rani,, Dr Pushpa. "Analysis of Option Prices Using Black Scholes Model." INTERANTIONAL JOURNAL OF SCIENTIFIC RESEARCH IN ENGINEERING AND MANAGEMENT 08, no. 05 (2024): 1–5. http://dx.doi.org/10.55041/ijsrem34488.

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A mathematical formula used in finance to calculate the theoretical price of an option and ascertain its option premium is known as the Black Scholes option pricing model, which aids option traders in making informed decisions. This article estimates the option premium of various call and put options using the Black Scholes Model. The three distinct option chains chosen for this essay are all Mid-Cap companies that are listed on the Indian National Stock Exchange. The companies are Suzlon Energy, Kalyan jewellers India, and Exide Industries Ltd. The analysis demonstrates that the options are e

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Lee, Eun-Kyung, and Yoon-Dong Lee. "Understanding Black-Scholes Option Pricing Model." Communications for Statistical Applications and Methods 14, no. 2 (2007): 459–79. http://dx.doi.org/10.5351/ckss.2007.14.2.459.

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6

Blake, D. "Option pricing models." Journal of the Institute of Actuaries 116, no. 3 (1989): 537–58. http://dx.doi.org/10.1017/s0020268100036696.

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7

Xiang, Shang. "Research on Option Pricing Method Based on the Black-Scholes Model." Economics and Management Innovation 2, no. 1 (2025): 69–77. https://doi.org/10.71222/k8mkc798.

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Option pricing is one of the core research topics in the field of financial engineering. As a classical option pricing method, the Black-Scholes model provides a significant foundation for both theory and practice in modern financial markets. This paper first elaborates on the theoretical foundation and mathematical derivation of the Black-Scholes model, analyzes its practical applications in option pricing, and explores its limitations, including the strict assumptions about market conditions and its applicability in environments with fluctuating volatility or sudden market jumps. To address

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Kim, Sol. "The Best Option Pricing Model for KOSPI 200 Weekly Options." Korean Journal of Financial Studies 51, no. 5 (2022): 499–521. http://dx.doi.org/10.26845/kjfs.2022.10.51.5.499.

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This study finds the best option pricing model for KOSPI 200 weekly options. It examines the in-sample pricing, out-of-sample pricing and hedging performances of the short-term options with a maximum maturity of seven days or less, which have not been analyzed in previous studies. The Black and Scholes (1973) model, Ad Hoc Black-Scholes model, and stochastic volatility and jumps models are compared. As a result, one of the Ad Hoc BlackScholes models, the absolute smile model using the strike price as an independent variable shows the best performance. However, its performance is not significan

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Yao, Yiyuan. "Prediction of Option Prices by BP Neural Network Based on Principal Component Analysis." Advances in Economics, Management and Political Sciences 118, no. 1 (2024): 289–98. https://doi.org/10.54254/2754-1169/2024.18633.

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Under the development of artificial intelligence, this paper adopts the neural network algorithm based on principal component analysis to perform data fitting and prediction on the option prices of Huaxia SSE 50ETF. It also compares the fitting and prediction accuracy of the traditional Black-Scholes option pricing, time series option pricing model and BP neural network algorithm based on principal component analysis for option prices. For the time series model, by analyzing the ACF and PACF figures, the research builds an ARIMA(2,2,0) model. For Black-Scholes model, the study utilizes the rel

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Chauhan, Arun, and Ravi Gor. "COMPARISON OF THREE OPTION PRICING MODELS FOR INDIAN OPTIONS MARKET." International Journal of Engineering Science Technologies 5, no. 4 (2021): 54–64. http://dx.doi.org/10.29121/ijoest.v5.i4.2021.203.

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  Black-Scholes option pricing model is used to decide theoretical price of different Options contracts in many stock markets in the world. In can find many generalizations of BS model by modifying some assumptions of classical BS model. In this paper we compared two such modified Black-Scholes models with classical Black-Scholes model only for Indian option contracts. We have selected stock options form 5 different sectors of Indian stock market. Then we have found call and put option prices for 22 stocks listed on National Stock Exchange by all three option pricing models. Finall

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Yan, Runze. "Option pricing and risk hedging for Visa." BCP Business & Management 32 (November 22, 2022): 203–10. http://dx.doi.org/10.54691/bcpbm.v32i.2889.

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As the core of the option transaction, the option price changing with the supply and demand in the market is a variable which affects the profit and loss of both trading sides directly. In the 20th century, multitudinous econometric pricing models proposed lacked universal recognition until the Black Scholes Merton model came out. This paper focuses on the stocks and options from Visa Inc. to do the article consisting of calibration, option pricing and hedging using fundamental Black Scholes Merton model and the extensive jump model mainly under the seldom used method. The article demonstrates

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Alfajriyah, Aimmatul Ummah, Endah R. M. Putri, Daryono Budi Utomo, and Moch Taufik Hakiki. "Stock Option Pricing Using Binomial Trees with Implied Volatility." Jurnal Matematika, Statistika dan Komputasi 20, no. 3 (2024): 724–42. http://dx.doi.org/10.20956/j.v20i3.34476.

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The Black-Scholes model provides an analytical solution in option pricing and has been widely used in finance. This model assumes constant volatility. Pricing option incorporating implied volatility is conducted using implied binomial tree. This study aims to simulate the prices of put options and call options using implied binomial trees, binomial trees and the Black-Scholes model and determine the factors that influence option prices. The simulation was conducted using Matlab. The option price resulted from implied binomial tree and binomial tree are compared with the option prices of the Bl

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Wang, Lujian, Minqing Zhang, and Zhao Liu. "The Progress of Black-Scholes Model and Black-Scholes-Merton Model." BCP Business & Management 38 (March 2, 2023): 3405–10. http://dx.doi.org/10.54691/bcpbm.v38i.4314.

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Black-Scholes (BS) model was first proposed in 1973, which has been modified by Robert Merton as the Black-Scholes-Merton (BSM) model subsequently. Contemporarily, these two models have been widely used and praised by financial scholars as well as employees. Plenty of scholars have tried to verify the accuracy of the and expressed their views on the existing defects in above models. Based on the existing literature, this article first introduces and derives the two models step by step and discusses the basic assumptions for these models. Subsequently, the applications of the two models are dem

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Alp, Özge Sezgin. "The Performance of Skewness and Kurtosis Adjusted Option Pricing Model in Emerging Markets." International Journal of Finance & Banking Studies (2147-4486) 5, no. 3 (2016): 70–84. http://dx.doi.org/10.20525/ijfbs.v5i3.285.

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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

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Li, Yuxuan. "Review and Practice of Option Pricing Research." Advances in Economics, Management and Political Sciences 7, no. 1 (2023): 320–28. http://dx.doi.org/10.54254/2754-1169/7/20230250.

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This paper reviews the past research on option pricing, including the Bachelier option pricing formula, Black-Scholes model, and the Cox-Ross-Rubinstein (CRR) binomial option pricing model. Then some practical calculations are performed on the Black-Scholes model and CRR binomial model and the differences between the results of these two models are analyzed for investors to choose the appropriate model for option prices. From the practical calculation results, it is verified that the Black-Scholes model can give out the analytical solutions of option prices and decrease the calculation of solu

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Zhang, Jianke, Yueyue Wang, and Sumei Zhang. "A New Homotopy Transformation Method for Solving the Fuzzy Fractional Black–Scholes European Option Pricing Equations under the Concept of Granular Differentiability." Fractal and Fractional 6, no. 6 (2022): 286. http://dx.doi.org/10.3390/fractalfract6060286.

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The Black–Scholes option pricing model is one of the most significant achievements in modern investment science. However, many factors are constantly fluctuating in the actual financial market option pricing, such as risk-free interest rate, stock price, option underlying price, and security price volatility may be inaccurate in the real world. Therefore, it is of great practical significance to study the fractional fuzzy option pricing model. In this paper, we proposed a reliable approximation method, the Elzaki transform homotopy perturbation method (ETHPM) based on granular differentiabilit

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17

Han, Yuecai, and Chunyang Liu. "Asian Option Pricing under an Uncertain Volatility Model." Mathematical Problems in Engineering 2020 (April 21, 2020): 1–10. http://dx.doi.org/10.1155/2020/4758052.

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In this paper, we study the asymptotic behavior of Asian option prices in the worst-case scenario under an uncertain volatility model. We derive a procedure to approximate Asian option prices with a small volatility interval. By imposing additional conditions on the boundary condition and splitting the obtained Black–Scholes–Barenblatt equation into two Black–Scholes-like equations, we obtain an approximation method to solve a fully nonlinear PDE.

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Wu, Yawei. "Options Pricing Comparison between the Black-Scholes Model and the Binomial Tree Model: A Case Study of American Equity Option and European-style Index Option." BCP Business & Management 32 (November 22, 2022): 168–77. http://dx.doi.org/10.54691/bcpbm.v32i.2885.

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In recent years, quantitative researchers used a wide range of models to price options, from the Black-Scholes model to more complex models such as the Heston model. This paper aims to analyze the effectiveness of the Black-Scholes model and the Binomial Tree model by using them to price Berkshire Hathaway’s equity options and European-style S&P 100 index options. The method used in this paper is gathering the market data of the options first. Second, using the data gathered to price the options by applying the Black-Scholes and Binomial Tree models. Third, comparing the derived theoretica

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SHOKROLLAHI, FOAD. "THE VALUATION OF EUROPEAN OPTION UNDER SUBDIFFUSIVE FRACTIONAL BROWNIAN MOTION OF THE SHORT RATE." International Journal of Theoretical and Applied Finance 23, no. 04 (2020): 2050022. http://dx.doi.org/10.1142/s0219024920500223.

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In this paper, we propose an extension of the Merton model. We apply the subdiffusive mechanism to analyze European option in a fractional Black–Scholes environment, when the short rate follows the subdiffusive fractional Black–Scholes model. We derive a pricing formula for call and put options and discuss the corresponding fractional Black–Scholes equation. We present some features of our model pricing model for the cases of [Formula: see text] and [Formula: see text].

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20

Ouyang, Qianyi. "Research on the Comparison of Option Pricing Models." Advances in Economics, Management and Political Sciences 134, no. 1 (2024): 134–39. https://doi.org/10.54254/2754-1169/2024.18794.

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Option pricing is essential for market participants as it facilitates risk management and price discovery. This study provides a comprehensive elucidation of diverse option pricing models. The author delineates the development of option pricing models from the fundamental Black-Scholes-Merton model (BSM) to more intricate methodologies. The importance of comprehending option pricing for hedging strategies and risk management is crucial in financial mathematics. The study analyses several models, including the BS model, Jump Diffusion model (JDM), Binomial Tree model (BTM), Monte Carlo simulati

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Ding, Ming, Jiaxin Liu, and Yuching Wu. "Pricing Chooser Option." Theoretical and Natural Science 107, no. 1 (2025): 220–26. https://doi.org/10.54254/2753-8818/2025.22645.

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With the rapid development of financial markets and the increasing diversification of investment instruments and choices, exotic derivatives like the Chooser option have emerged. This special type of option contract grants holders the right to choose whether the option is a put or a call at the selection date. This flexibility facilitates investors' hedging policies and diversification to spread risk and enhance returns. However, pricing it appropriately becomes a difficult task because of its complexity. This paper first aims to price the Chooser option in two ways: the N-period Binomial tree

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Liao, Xuanting, and Jiawei Zhuang. "The Research on the Pricing of Double Barrier Option Based on the Black-Scholes Model." BCP Business & Management 37 (February 1, 2023): 320–25. http://dx.doi.org/10.54691/bcpbm.v37i.3582.

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The two barrier values in the double barrier option are the focus in the evaluation simulation and they affect the knock-in and knock-out of the option. This paper, simulates a double barrier option and calculates its option value based on the Black-Scholes Model, using Coca-Cola stock data from January 2022 to the end of July, and verifies the feasibility of the Black-Scholes model. This paper also analyzes the sensitivity of the influence of the two barrier values on the option value, outlining the option value changes under different barrier values. The main finding of this paper is that th

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Wu, Shujin, and Shiyu Wang. "European Option Pricing Formula in Risk-Aversive Markets." Mathematical Problems in Engineering 2021 (July 31, 2021): 1–17. http://dx.doi.org/10.1155/2021/9713521.

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In this study, using the method of discounting the terminal expectation value into its initial value, the pricing formulas for European options are obtained under the assumptions that the financial market is risk-aversive, the risk measure is standard deviation, and the price process of underlying asset follows a geometric Brownian motion. In particular, assuming the option writer does not need the risk compensation in a risk-neutral market, then the obtained results are degenerated into the famous Black–Scholes model (1973); furthermore, the obtained results need much weaker conditions than t

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Mehrdoust, Farshid, Amir Hosein Refahi Sheikhani, Mohammad Mashoof, and Sabahat Hasanzadeh. "Block-pulse operational matrix method for solving fractional Black-Scholes equation." Journal of Economic Studies 44, no. 3 (2017): 489–502. http://dx.doi.org/10.1108/jes-05-2016-0107.

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Purpose The purpose of this paper is to evaluate a European option using the fractional version of the Black-Scholes model. Design/methodology/approach In this paper, the authors employ the block-pulse operational matrix algorithm to approximate the solution of the fractional Black-Scholes equation with the initial condition for a European option pricing problem. Findings The fractional derivative will be described in the Caputo sense in this paper. The authors show the accuracy and computational efficiency of the proposed algorithm through some numerical examples. Originality/value This is th

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Song, Lina, and Weiguo Wang. "Solution of the Fractional Black-Scholes Option Pricing Model by Finite Difference Method." Abstract and Applied Analysis 2013 (2013): 1–10. http://dx.doi.org/10.1155/2013/194286.

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This work deals with the put option pricing problems based on the time-fractional Black-Scholes equation, where the fractional derivative is a so-called modified Riemann-Liouville fractional derivative. With the aid of symbolic calculation software, European and American put option pricing models that combine the time-fractional Black-Scholes equation with the conditions satisfied by the standard put options are numerically solved using the implicit scheme of the finite difference method.

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Yavuz, M., and N. Özdemir. "A different approach to the European option pricing model with new fractional operator." Mathematical Modelling of Natural Phenomena 13, no. 1 (2018): 12. http://dx.doi.org/10.1051/mmnp/2018009.

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In this work, we have derived an approximate solution of the fractional Black-Scholes models using an iterative method. The fractional differentiation operator used in this paper is the well-known conformable derivative. Firstly, we redefine the fractional Black-Scholes equation, conformable fractional Adomian decomposition method (CFADM) and conformable fractional modified homotopy perturbation method (CFMHPM). Then, we have solved the fractional Black-Scholes (FBS) and generalized fractional Black-Scholes (GFBS) equations by using the proposed methods, which can analytically solve the fracti

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El-Khatib, Youssef. "A Homotopy Analysis Method for the Option Pricing PDE in Post-Crash Markets." Mathematical Economics Letters 2, no. 3-4 (2014): 45–50. http://dx.doi.org/10.1515/mel-2013-0014.

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AbstractWe investigate a solution for the option pricing partial differential equation (PDE) in a market suffering from a financial crisis. The post-crash model assumes that the volatility is stochastic. It is an extension of the famous Black and Scholes model. Therefore, the option pricing PDE for the crisis model is a generalization of the Black and Scholes PDE. However, to the best knowledge, it does not have a closed form solution for the general case. In this paper, we provide a solution for the pricing PDE of a European option during financial crisis using the homotopy analysis method.

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Sun, Yesen, Wenxiu Gong, Hongliang Dai, and Long Yuan. "Numerical Method for American Option Pricing under the Time-Fractional Black–Scholes Model." Mathematical Problems in Engineering 2023 (February 20, 2023): 1–17. http://dx.doi.org/10.1155/2023/4669161.

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The fractional Black–Scholes model has had limited applications in financial markets. Instead, the time-fractional Black–Scholes equation has attracted much research interest. However, it is difficult to obtain the analytic expression for American option pricing under the time-fractional Black–Scholes model. This paper will present an operator-splitting method to price the American options under the time-fractional Black–Scholes model. The fractional partial differential complementarity problem (FPDCP) that the American option price satisfied is split into two subproblems: a linear boundary va

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Rifki Chandra Utama, Afra Maulia Fitriana Hilnie, and Wiwit Angga Siswahyudi. "EUROPEAN PUT OPTION PRICING MODEL WITH GRAM-CHARLIER EXPANSION IN THIRD MOMENTS." Perwira Journal of Science & Engineering 2, no. 1 (2022): 41–49. http://dx.doi.org/10.54199/pjse.v2i1.118.

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The Black-Scholes model is one of the most popular and widely applied option pricing models in both academic and practical contexts developed by Black and Scholes (1973). The practical assumption in the Black-Scholes model is stock return following the normal distribution with constant volatility. However, many stock returns are not normally distributed, so should consider the skewness and kurtosis of the stock return. This developmental model adapts the Gram-Charlier expansion to adapt skewness and kurtosis to the Black-Scholes formula. Approximation method used is an alternative approach wit

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BOYARCHENKO, SVETLANA I., and SERGEI Z. LEVENDORSKIǏ. "OPTION PRICING FOR TRUNCATED LÉVY PROCESSES." International Journal of Theoretical and Applied Finance 03, no. 03 (2000): 549–52. http://dx.doi.org/10.1142/s0219024900000541.

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A general class of truncated Lévy processes is introduced, and possible ways of fitting parameters of the constructed family of truncated Lévy processes to data are discussed. For a market of a riskless bond and a stock whose log-price follows a truncated Lévy process, TLP-analogs of the Black–Scholes equation, the Black–Scholes formula, the Dynkin derivative and the Leland's model are obtained, a locally risk-minimizing portfolio is constructed, and an optimal exercise price for a perpetual American put is computed.

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MA, CHENGHU. "PREFERENCES, LÉVY JUMPS AND OPTION PRICING." Annals of Financial Economics 03, no. 01 (2007): 0750001. http://dx.doi.org/10.1142/s2010495207500017.

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This paper derives an equilibrium formula for pricing European options and other contingent claims which allows incorporating impacts of several important economic variable on security prices including, among others, representative agent preferences, future volatility and rare jump events. The derived formulae is general and flexible enough to include some important option pricing formulae in the literature, such as Black–Scholes, Naik–Lee, Cox–Ross and Merton option pricing formulae. The existence of jump risk as a potential explanation of the moneyness biases associated with the Black–Schole

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Fatone, Lorella, Francesca Mariani, Maria Cristina Recchioni, and Francesco Zirilli. "The Use of Statistical Tests to Calibrate the Black-Scholes Asset Dynamics Model Applied to Pricing Options with Uncertain Volatility." Journal of Probability and Statistics 2012 (2012): 1–20. http://dx.doi.org/10.1155/2012/931609.

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A new method for calibrating the Black-Scholes asset price dynamics model is proposed. The data used to test the calibration problem included observations of asset prices over a finite set of (known) equispaced discrete time values. Statistical tests were used to estimate the statistical significance of the two parameters of the Black-Scholes model: the volatility and the drift. The effects of these estimates on the option pricing problem were investigated. In particular, the pricing of an option with uncertain volatility in the Black-Scholes framework was revisited, and a statistical signific

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Seftiani, Seftiani, Neva Satyahadewi, and Nur'ainul Miftahul Huda. "Penerapan Model Harga Opsi Black Scholes dalam Penentuan Premi Asuransi Jiwa Dwiguna Unit Link." Euler : Jurnal Ilmiah Matematika, Sains dan Teknologi 11, no. 2 (2023): 318–27. http://dx.doi.org/10.37905/euler.v11i2.23049.

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Unit-linked life insurance is one of the most popular insurance products. This product connects the element of protection with investment assets in a product. Regarding option pricing, the Black Scholes model is one method that can be used. The advantage of this model is that it is a call option valuation model and is in great demand among financial associations because the option rate obtained from the calculation of this model is an accurate value. This research aims to determine the premium value of unit-linked endowment life insurance by applying the Black Scholes option pricing model. Thi

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Lindquist, W. Brent, Svetlozar T. Rachev, Jagdish Gnawali, and Frank J. Fabozzi. "Dynamic Asset Pricing in a Unified Bachelier–Black–Scholes–Merton Model." Risks 12, no. 9 (2024): 136. http://dx.doi.org/10.3390/risks12090136.

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We present a unified, market-complete model that integrates both Bachelier and Black–Scholes–Merton frameworks for asset pricing. The model allows for the study, within a unified framework, of asset pricing in a natural world that experiences the possibility of negative security prices or riskless rates. Unlike the classical Black–Scholes–Merton, we show that option pricing in the unified model differs depending on whether the replicating, self-financing portfolio uses riskless bonds or a single riskless bank account. We derive option price formulas and extend our analysis to the term structur

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Jiaxin, Chen. "The Benefits and Potential Risks of Using Option Pricing for Investment in Chinas OTC Derivatives Market under the Black-Scholes Model." Advances in Economics, Management and Political Sciences 55, no. 1 (2023): 159–64. http://dx.doi.org/10.54254/2754-1169/55/20230997.

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In this paper, based on the qualitative research and analysis of Chinas financial market, both the benefits and potential risks of using option pricing for investment in Chinas OTC derivatives market under the Black-Scholes model are obtained. In China, OTC derivatives mainly refer to the one-to-one contract trading between institutions, non-on-exchange financial derivatives, naturally, its environment is called OTC derivatives market; Black-Scholes model is a mathematical model for option pricing. Based on the assumption that stock price obeys geometric Brownian motion, it measures the relati

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Sinkala, Winter, and Tembinkosi F. Nkalashe. "Lie Symmetry Analysis of a First-Order Feedback Model of Option Pricing." Advances in Mathematical Physics 2015 (2015): 1–9. http://dx.doi.org/10.1155/2015/361785.

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A first-order feedback model of option pricing consisting of a coupled system of two PDEs, a nonliner generalised Black-Scholes equation and the classical Black-Scholes equation, is studied using Lie symmetry analysis. This model arises as an extension of the classical Black-Scholes model when liquidity is incorporated into the market. We compute the admitted Lie point symmetries of the system and construct an optimal system of the associated one-dimensional subalgebras. We also construct some invariant solutions of the model.

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Ugomma, Chukwudi Anderson. "An Empirical Study of Stock Price Returns Using Black-Scholes Option Pricing Model." International Journal for Research in Applied Science and Engineering Technology 11, no. 8 (2023): 2058–66. http://dx.doi.org/10.22214/ijraset.2023.55479.

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Abstract: This study examined empirically the predictive ability of Black-Scholes Option pricing model in Nigerian Stock Market by testing whether there is any significant difference between the market (underlying) price of the stock and the theoretical prices. The data used for this study was Coca-Cola Stock prices from 2018 to 2022 obtained from http://www.investing.com and were analyzed using Statistical packages such as Microsoft Excel and Minitab to obtain the result. The results showed that there is a significant difference between the underlying and the theoretical price (Black-Scholes

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Dong, Le Le, Lian Xue, Lei Wei Lin, Tuo Chen, and Ming Hui Wu. "Numerical Simulation of Black-Scholes Model by Finite Difference Method." Applied Mechanics and Materials 513-517 (February 2014): 4090–93. http://dx.doi.org/10.4028/www.scientific.net/amm.513-517.4090.

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Option is the typical representative of financial derivatives, and this paper is focused on the valuation problem of Option. Based on the Black-Scholes Pricing model which had far-reaching influence on the pricing of financial derivatives, researched its theoretical basis and derivation process, and then get the numerical solution via finite difference method and image simulation. And it also includes the part of empirical studies. In research, ZTR and HQ is chosen and analyzed, in order to get the pricing of European put option.

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Antwi Baafi, Joseph. "The Nexus Between Black-Scholes-Merton Option Pricing and Risk: A Case of Ghana Stock Exchange." Archives of Business Research 10, no. 5 (2022): 140–52. http://dx.doi.org/10.14738/abr.105.12350.

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Even though option pricing and its market activities are not new, in Ghana the idea of trading options is yet to be realized. One popular method in pricing options is known as Black-Scholes-Merton option pricing model. Even though option pricing activities are not currently happening on the Ghana Stock Exchange, authors looked at the possibilities and preparedness of the GES to start trading such financial instrument. The main objective of this study therefore was to know how Black-Scholes-Merton model could be used to help in appropriate option value and undertake a risk assessment of stocks

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Lin, Xiaozheng, Meiqing Wang, and Choi-Hong Lai. "A modification term for Black-Scholes model based on discrepancy calibrated with real market data." Data Science in Finance and Economics 1, no. 4 (2021): 313–26. http://dx.doi.org/10.3934/dsfe.2021017.

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<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 d

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Malek, R. "About the valuation of American option under Black-Scholes model : a numerical study." Moroccan Journal of Pure and Applied Analysis 9, no. 1 (2023): 75–85. http://dx.doi.org/10.2478/mjpaa-2023-0005.

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Abstract In the history of option pricing, Black-Scholes model is one of the most significant models. In this paper, we present a new numerical strategy for valuing American option pricing problems governed by Black-Scholes model (BSM). Numerical computations are carried out to show the efficiency and robustness of the proposed method. We compare our numerical solution with the ones based on Finite Element Method (FEM) and the Enriched Finite Element Method (PUFEM). Our result shows the efficiency of the proposed strategy. In addition, that approach can be used to treat nonlinear evolutionary

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Boutouria, Nahla, Salah Ben Hamad, and Imed Medhioub. "Option Valuation in the Presence of Market Sentiment: Application to Listed Companies in the CAC40 Index." Cognizance Journal of Multidisciplinary Studies 1, no. 9 (2021): 1–11. http://dx.doi.org/10.47760/cognizance.2021.v01i09.001.

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Asset pricing theory based on rationality was widely criticized in literature. Indeed, the non-inclusion of investor behavior and assuming market efficiency led to the weaknesses of option valuation through the traditional Black and Scholes model (1973). In this paper we examine the effect of the inclusion of investor behavior in the option pricing model. We test whether the Black and Scholes model in presence of sentiment behavior can lead to an improvement of the calculation of call price. Using daily data of 30 listed companies of France in the CAC40 index for the period June 18, 2009 to Ma

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Nahla, Boutouria, Ben Hamad Salah, and Medhioub Imed. "Option Valuation in the Presence of Market Sentiment: Application to Listed Companies in the CAC40 Index." Cognizance Journal of Multidisciplinary Studies 1, no. 9 (2021): 1–11. https://doi.org/10.47760/cognizance.2021.v01i09.001.

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Asset pricing theory based on rationality was widely criticized in literature. Indeed, the non-inclusion of investor behavior and assuming market efficiency led to the weaknesses of option valuation through the traditional Black and Scholes model (1973). In this paper we examine the effect of the inclusion of investor behavior in the option pricing model. We test whether the Black and Scholes model in presence of sentiment behavior can lead to an improvement of the calculation of call price. Using daily data of 30 listed companies of France in the CAC40 index for the period June 18, 2009 to Ma

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Yang, Xiao Zhong, and Gao Xin Zhou. "Improved Additive Operator Splitting Algorithms for Basket Option Pricing Model." Advanced Materials Research 756-759 (September 2013): 2739–43. http://dx.doi.org/10.4028/www.scientific.net/amr.756-759.2739.

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In order to solve Black-Scholes equation of basket option pricing model by numerical method. This paper used Additive Operator Splitting (AOS) algorithm to split the multi-dimensional Black-Scholes equation into equivalent one-dimensional equation set, and constructed 'Explicit-Implicit' and 'Implicit-Explicit' schemes to solve it. Then compatibility, stability and convergence of those schemes were analyzed. Finally, this paper compared computation time and precision of the schemes through numerical experiments. 'Explicit-Implicit' and 'Implicit-Explicit' schemes of AOS algorithms have both hi

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Kehinde, Imoukhedeme Paul. "Markov Chain Monte Carlo (MCMC) Estimation of Heston Models Using Fourier Transform in Option Pricing." Revista O Universo Observável 1, no. 6 (2024): 2–15. http://dx.doi.org/10.69720/2966-0599.2024.0002.

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This study examines the role of stochastic volatility in option pricing through the Heston model, employing advanced computational techniques such as Markov Chain Monte Carlo (MCMC) methods and Fourier transforms. By comparing the pricing accuracy of the Heston model, which captures stochastic volatility, to the Black- Scholes model, which assumes constant volatility, we demonstrate the superior flexibility and robustness of the Heston framework. Our results show that the Heston model consistently outperforms Black-Scholes, particularly when volatility parameters estimated via MCMC are well-ca

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Luo, YuLin, and ZhaoYu Wang. "A Review of the Option Pricing Model and Further Development." Advances in Economics, Management and Political Sciences 64, no. 1 (2023): 96–103. http://dx.doi.org/10.54254/2754-1169/64/20231499.

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The Black Scholes model and binomial tree model have been the main research objects of scholars in the past fifty years. This article summarizes the optimization process of these two classic option pricing models to understand the different directions of optimizing the models and to provide ideas for future model improvement. Improvements from scholars to the Black-Scholes model mainly focus on the basic model and the relevant variables involved in option pricing, while the optimization of the binomial tree model focuses on the reduction of pricing errors as well as the improvement of model fi

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Zhang, Yicheng. "Research on insurance pricing under option game based on Black-Scholes model." SHS Web of Conferences 208 (2024): 03005. https://doi.org/10.1051/shsconf/202420803005.

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The pricing of insurance products has always occupied a central position in the insurance business and has long been an important focus of academic research. With the development of theory, the combination of option theory and game theory provides a new analytical perspective for insurance pricing. Specifically, insurance can be viewed as a kind of option so that the strategies in option game theory can be applied to determine a reasonable premium level. In this context, this study aims to explore in depth how option game theory can be applied to the insurance pricing problem. First, this pape

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Lin, Wensheng. "Black-Scholes Model’s application in rainbow option pricing." BCP Business & Management 32 (November 22, 2022): 500–507. http://dx.doi.org/10.54691/bcpbm.v32i.2988.

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In this paper, we use excel as a tool to explore the pricing of rainbow options and their advantages based on the Black-Scholes Model. Two-color rainbow options are mainly explored in the paper, in which the underlying stocks are Apple and ExxonMobil. Simulating the price of two stocks is performed through Excel. Return on the corresponding European options and rainbow options is obtained after that. Next, the differences between the return on rainbow options and European options and pricing on rainbow option are analyzed. Finally, sensitivity analysis is carried out to further explore rainbow

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C. A., Ugomma,. "On the Distribution of the Mixed-Lognormal-Weibull Option Pricing Model." Advanced Journal of Science, Technology and Engineering 4, no. 4 (2024): 111–24. http://dx.doi.org/10.52589/ajste-j50vxba8.

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This paper intends to test whether the Mixed-Lognormal-Weibull Distribution (MLWD) option pricing model comes from the same distribution and whether the model is a good fit in Black-Scholes option pricing model. The data for this study were obtained from Australian Clearing House of Australian Securities Exchange (ASX) which consist of 50 enlisted stock as products of monthly market summary for long term options collected from January, 3rd 2017 to December, 31st 2017, comprising 720 trading days arranged in accordance to 25, 27, 28, 29 and 30 maturity days. Maximum Likelihood Estimate was used

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PAN, MIN, and SHENGQIAO TANG. "OPTION PRICING AND EXECUTIVE STOCK OPTION INCENTIVES: AN EMPIRICAL INVESTIGATION UNDER GENERAL ERROR DISTRIBUTION STOCHASTIC VOLATILITY MODEL." Asia-Pacific Journal of Operational Research 28, no. 01 (2011): 81–93. http://dx.doi.org/10.1142/s0217595911003065.

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This article investigates the valuation of executive stock options when the stock return volatility is governed by the general error distribution stochastic volatility model, involving both the features of the stock return volatility and the abnormal fluctuations of the stock price at the expiration date. We estimate the parameters in the general error distribution stochastic volatility model using the Markov Chain Monte Carlo method with Shanghai & Shenzhen 300 Index in China as a sample, and compare the executive stock option values calculated by Black-Scholes option pricing model and th

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