The research into the impact of the uncertain factors on the Black–Scholes model parameters
Option pricing is one of the most important issues while dealing with this sort of terminal assets. At present, the probabilistic Black–Scholes model and the binominal Cox–Ross–Rubinstein model are the most popular and widely used to this end. Therefore, the paper discusses the impact of the uncertain factors on the Black–Scholes model parameters d1 and d2. The author poses a question of how the introduction of the disturbances to the Black–Scholes sigma parameter affects the parameters d1 and d2. To find it out, the stochastic simulation is used. Also such measures as mean, standard deviation, skewness, kurtosis and Jarque–Ber test are employed here. According to the results of the experiment described above, the intensity of the disturbances introduced to the model plays the key role. In the final part of the article, these results are briefly compared to the ones obtained in another, similar research in which the Cox–Ross–Rubinstein model parameters were disturbed. The comparison shows that the results obtained from both experiments are very similar. However, it should be underlined that they are slightly better for the probabilistic model of Black–Scholes.
Year of publication: |
2008
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Authors: | Anusik, Aleksandra |
Published in: |
Operations Research and Decisions. - Wydział Informatyki i Zarządzania. - Vol. 4.2008, p. 5-17
|
Publisher: |
Wydział Informatyki i Zarządzania |
Subject: | option pricing | Black–Scholes model | d1 and d2 parameters | stochastic simulation |
Saved in:
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