Open Access. Powered by Scholars. Published by Universities.®
Articles 1 - 1 of 1
Full-Text Articles in Business
Comparison Of Option Price From Black-Scholes Model To Actual Values, Matthew J. Krznaric
Comparison Of Option Price From Black-Scholes Model To Actual Values, Matthew J. Krznaric
Williams Honors College, Honors Research Projects
The Black-Scholes model is a widely used method for pricing European-style options in a straightforward way, through the use of calculations and ideal market assumptions. Due to certain unrealistic ideal conditions exercised by the model, The Black-Scholes technique of pricing options may not be entirely accurate in implementation. This paper addresses these problems due to the model limitations, determining how The Black-Scholes method compares to the results when using the actual data. Using a mix of historical S&P500 data and generated normal distributions, we first calculated and graphed option prices through the Black-Scholes formulas. With the help of R, we …