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Showing 1 to 20 of 137 for “"Scholes"”.
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KVA in Black Scholes Pricing
The post 2007-financial crisis era has led to renewed zeal in quantifying market incompleteness when pricing contingent claims. This quantification exercise is necessary in maintaining a stable and sustainable banking operation and thus the XVAs have emerged as the metrics for market …
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Alternatives to the Black-Scholes model
… models to the one posited by Black and Scholes. I consider discontinuous security price movements, non-constant volatility, and models very different from the Black-Scholes model. I found that most of the model prices for the close to at-the-money options are very different from the …
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Parameter estimation of the Black-Scholes-Merton model
… options are often modeled according to the Black-Scholes-Merton (BSM) model, a stochastic differential equation (SDE) depending on unknown parameters. A derivation of the solution to this SDE is reviewed, resulting in a stochastic process called geometric Brownian motion (GBM) which depends on two …
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Application of Volatility Targeting Strategies within a Black-Scholes Framework
The traditional Black-Scholes (BS) model relies heavily on the assumption that underlying returns are normally distributed. In reality however there is a large amount of evidence to suggest that this assumption is weak and that actual return distributions are non-Gaussian. This dissertation looks …
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An analysis of the Black-Scholes model for valuing stock options
This paper will discuss the Black-Scholes Method for valuing stock options. The assumptions of the model will be discussed, especially the assumption that the stock market is lognormally distributed. The volatility of stocks will be estimated and those results compared with the results given by the …
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The Black-Scholes model and the pricing of stock options in South Africa
… finance theory. Central to OPT is the Black-Scholes model, the first option pricing model derived within a general equilibrium framework, and therefore consistent with all arbitrage conditions an asset pricing model must satisfy. An attempt is made at explaining this model, and the first part …
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The Distribution of Individual Stock Returns in a Modified Black-scholes Option Pricing Model
… a "best" distribution is found, a modified Black-Scholes model will be defined by modifying the Weiner process. We use Monte Carlo simulations to generate estimated prices under specified parameters, and compare these prices to those simulated by the model using the Weiner process. It was found …
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Incorporating default risk into the Black-Scholes model using stochastic barrier option pricing theory
… develops a general model that prices Black-Scholes options subject to intertemporal default risk using stochastic barrier option pricing theory. The explicit closed-form solution is obtained by generalizing the reflection principle to k-space to determine the appropriate transition density …
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Option pricing and machine learning: a comparison of black-scholes, bachelier, and artificial neural networks
… and academics alike have applied the Black-Scholes model (or derivatives thereof) when pricing options practically since the introduction of the model in 1973. The recent coronavirus pandemic and the oil futures price crash of April 2020 have caused major markets to briefly switch to the …
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The efficiency of the South African market for rights issues: an application of the Black-Scholes model
Capital market efficiency is an important aspect of modern financial theory. This is because in an efficient capital market, scarce resources are optimally allocated to productive investments in a way that is beneficial to market participants. Yet there appears to be a dearth of research into the …
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An examination of kurtosis of lognormality in the Black-Scholes option pricing formula in the South African warrants market
… asset price volatility of classical Black-Scholes model hasbeen challenged continuously. The symmetrical distribution emphasises a lognormalized asset. This paper aims to investigate the volatility distribution (i.e. kurtosis) of the South African warrants market at Johannesburg Stock …
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Stock Option Valuation for Thinly Traded Enterprises: Comparing the Historically Based Intrinsic Value Model to the Black-Scholes-Merton Model
… these options, most accountants use the Black-Scholes-Merton (BSM) option pricing model because of its simplicity. While evidence suggests that the model is effective for larger entities with regularly traded stocks, the BSM model becomes less effective when a stock's price is highly volatile …
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An investigation into the use of the Black-Scholes model for pricing long term options, for the purpose of costing maturity guarantees
This thesis investigates the use of the Black-Scholes option pricing model for long term options for the purposes of costing long term maturity guarantees. The maturity guarantees concerned are typically given on endowment policies issued by life offices. These endowment policies have terms usually …
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Testes do CAPM no mercado de ações do setor de energia elétrica brasileiro: aplicações de Black, Jensen e Scholes (1972) e Fama e MacBeth (1973)
… na metodologia dos autores Black, Jensen e Scholes (1972) e Fama MacBeth (1973). Os dados deste estudo foram coletados na base Economática, relativos a preços mensais das ações do setor, pontuação do Índice da Bolsa de Valores de São Paulo (IBOVESPA) e taxas mensais do Certificado de …
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Equity options and stochastic interest rates : error in Black-Scholes prices and hedges for European- and American-style equity options when short rates are Ornstein-Uhlenbeck
… considers the errors when using Black-Scholes prices and hedges for European equity options (Black&Scholes (1973), Merton (1973)) and American equity options (Karatzas (1988)) in an economy with stochastic interest rates. In particular, we consider an economy with Vasicek (1977) type …
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Novel fitted multi-point flux approximation methods for options pricing
… to the resolution of the second order Black-Scholes Partial Differential Equation (PDE). Several studies have been conducted to solve this PDE for pricing different type of financial options. However the Black-Scholes PDE has an analytical solution only for pricing European options with …
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Hedging volatility: different perspectives compared
The accuracy of the Black and Scholes (1973) delta and vega neutral portfolio for a vanilla option was compared to a benchmark set by the Heston (1993) model in a stochastic volatility environment. The Black-Scholes portfolio was implemented using a fixed volatility and by implying volatility from …
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Options in emerging markets.
… known option pricing model, i. e. the Black and Scholes Option Pricing Model, in order to produce theoretical option prices. However, the model itself assumes that the markets are efficient so that theoretical prices do not differ significantly from market prices. But what is happening in …
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