An examination of kurtosis of lognormality in the Black-Scholes option pricing formula in the South African warrants market

The assumption of constant 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 Exchange based on a comparison of option implied distributions of the terminal price of the TOP European Call option with lognormal distribution. The result indicates that the constant volatility of Black-Scholes model does not show in the selected warrant market.

Grantor dc:publisher.institution

School of Economics

Year dc:date.issued

2005

Author dc:creator

• Chen, Hung-Hsiang

Advisor dc:contributor.advisor

• Abraham, Haim

Language dc:language.iso

eng

Handle dc:identifier.uri

http://hdl.handle.net/11427/5771

OAI identifier oai:identifier

oai:open.uct.ac.za:11427/5771