Physical Sciences and Mathematics Commons^™

Black-Scholes And Extended Black-Scholes Models: A Comparative Statistical Analysis, Bradley Thomas Bush

All Graduate Plan B and other Reports, Spring 1920 to Spring 2023

Much research has been done on options pricing. Black and Scholes [12] set the benchmark in 1973 with their model for arbitrage-free, risk-neutral options valuation. Arbitrage-free refers to a market environment where prices are such that trading opportunities with no risk do not exist and risk-neutral commodities earn a risk free interest rate. Since then the literature has seen a multitude of models improving the fit of the traditional Black -Scholes (BS) model. A brief overview of options and these models is given. A derivation and discussion of BS is followed by a derivation and discussion of the Extended Black-Scholes …