A Study on Black and Scholes Option Pricing Model for Selected Companies

• Published in: Global Journal of Research in Management Vol. 8; no. 1; p. 28
• Main Authors: Tiwari, Shubham, Patel, Bhoomi
• Format: Journal Article
• Language: English
• Published: Surat Publishing India Group 01.01.2018
• Subjects: Investments; Put & call options; Securities prices; Student's t-test
• ISSN: 2319-8915

The Study on “Black and Scholes option pricing model” is a study that helps to classify the theoretical price of Call option and Put option of the contract. The value derived from the Black and Scholes model guides investor about how much premium the investor has to pay for entering into Call option and Put option Contract. In order to fulfil this study researcher have collected data of top 10 companies based on the market capitalization. Various data’s such Stock price, Strike price, Volatility of stock, Risk free interest rate and Time to expiry. Paired Sample T-test, Greeks elements calculations were done for the analysis of data Black and Scholes model, From the calculation of Black and Scholes model, the value of the premium was derived for 10 different stocks’ options and at two different time period. By calculating the value of Call and Put option it was compared with Market value of Call and Put option through Paired Sample T-test and found that in most of case the model was found to be efficient as the calculated value of call and put option was equal to the market value of call and put option. In order to measure the Sensitivity of Call and Put option’s Greek Elements calculation was used and found that Greek elements are important factors that clearly states that Delta, Gamma, Theta, Vega and Rho are important tool that -measures the sensitivity of call option and put option prices.