A Study on Black and Scholes Option Pricing Model for Selected Companies
Published: 2018
Author(s) Name: Shubham Tiwari and Bhoomi Patel |
Author(s) Affiliation: Student, SRIMCA-MBA, Gujarat, India.
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Abstract
The Study on “Black and Scholes option pricing model” is a study that helps to
classify the theoretical price of Call option and Put option of the contract. The
value derived from the Black and Scholes model guides investor about how
much premium the investor has to pay for entering into Call option and Put
option Contract. In order to fulfil this study researcher have collected data of top
10 companies based on the market capitalization. Various data’s such Stock
price, Strike price, Volatility of stock, Risk free interest rate and Time to expiry.
Paired Sample T-test, Greeks elements calculations were done for the analysis of
data Black and Scholes model,
From the calculation of Black and Scholes model, the value of the premium was
derived for 10 different stocks’ options and at two different time period. By
calculating the value of Call and Put option it was compared with Market value
of Call and Put option through Paired Sample T-test and found that in most of
case the model was found to be efficient as the calculated value of call and put
option was equal to the market value of call and put option. In order to measure
the Sensitivity of Call and Put option’s Greek Elements calculation was used and
found that Greek elements are important factors that clearly states that Delta,
Gamma, Theta, Vega and Rho are important tool that -measures the sensitivity
of call option and put option prices.
Keywords: Black and Scholes option pricing model, Call option, Put option, Premium, Volatility, Paired sample T-test, Greeks Elements.
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