Global Journal of Research in Management

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A Study on Black and Scholes Option Pricing Model for Selected Companies


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1 Uka Tarsadia University, India
     

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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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  • Chakrabarti, B., & Santra, A. (2017). Comparison of Black Scholes and Heston Models for Pricing Index Options.

  • Cui, Y., & Yu, B. (2012). The Simulation of European Call Options’ Sensitivity Based on Black-Scholes Option Formula. Journal of Mathematical Finance, 2(03), 264.

  • Dr. Benedict valentine Arulanandam, Koh wei sin, Muchemi andrew Muita. Relevance of Black-Scholes model on Malaysian KLCI options: an empirical study.

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  • Jose, J., & Kanchan, D. A study on parameters of option pricing: The Greeks.

  • Rajanikanth, C., & Reddy, E. L. Analysis of Price Using Black Scholes and Greek Letters in Derivative European Option Market.

  • Sharma, M. and Dr. Kapil Arora (2015). A Study of Relevance of Black-Scholes Model in Indian Stock Option Market (Research Scholar and Associate professor, Institute of Management, J.K. Lakshmipat University, Jaipur).

  • Zhang, J. (2011). Organization & Analysis of Stock Option Market Data (Doctoral dissertation, Worcester Polytechnic Institute).

  • https://www.nseindia.com/live_market/dynaContent/live_watch/get_quote/GetQuoteFO.jsp?underlying=RELINFRA&instrument=FUTSTK&type=-&strike=-&expiry=28DEC2017

  • https://www.nseindia.com/products/content/derivatives/equities/historical_fo.htm

  • http://www.option-price.com/index.php

  • http://www.moneycontrol.com/stocks/marketinfo/marketcap/bse/index.html

  • https://www.investopedia.com/terms/g/greeks.asp

  • https://www.youtube.com/watch?v=aAQFgf8XKys&t=26s


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  • A Study on Black and Scholes Option Pricing Model for Selected Companies

Abstract Views: 315  |  PDF Views: 0

Authors

Bhoomi Patel
Uka Tarsadia University, India

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.

References