英语论文网

留学生硕士论文 英国论文 日语论文 澳洲论文 Turnitin剽窃检测 英语论文发表 留学中国 欧美文学特区 论文寄售中心 论文翻译中心 我要定制

Bussiness ManagementMBAstrategyHuman ResourceMarketingHospitalityE-commerceInternational Tradingproject managementmedia managementLogisticsFinanceAccountingadvertisingLawBusiness LawEducationEconomicsBusiness Reportbusiness planresearch proposal

英语论文题目英语教学英语论文商务英语英语论文格式商务英语翻译广告英语商务英语商务英语教学英语翻译论文英美文学英语语言学文化交流中西方文化差异英语论文范文英语论文开题报告初中英语教学英语论文文献综述英语论文参考文献

ResumeRecommendation LetterMotivation LetterPSapplication letterMBA essayBusiness Letteradmission letter Offer letter

澳大利亚论文英国论文加拿大论文芬兰论文瑞典论文澳洲论文新西兰论文法国论文香港论文挪威论文美国论文泰国论文马来西亚论文台湾论文新加坡论文荷兰论文南非论文西班牙论文爱尔兰论文

小学英语教学初中英语教学英语语法高中英语教学大学英语教学听力口语英语阅读英语词汇学英语素质教育英语教育毕业英语教学法

英语论文开题报告英语毕业论文写作指导英语论文写作笔记handbook英语论文提纲英语论文参考文献英语论文文献综述Research Proposal代写留学论文代写留学作业代写Essay论文英语摘要英语论文任务书英语论文格式专业名词turnitin抄袭检查

temcet听力雅思考试托福考试GMATGRE职称英语理工卫生职称英语综合职称英语职称英语

经贸英语论文题目旅游英语论文题目大学英语论文题目中学英语论文题目小学英语论文题目英语文学论文题目英语教学论文题目英语语言学论文题目委婉语论文题目商务英语论文题目最新英语论文题目英语翻译论文题目英语跨文化论文题目

日本文学日本语言学商务日语日本历史日本经济怎样写日语论文日语论文写作格式日语教学日本社会文化日语开题报告日语论文选题

职称英语理工完形填空历年试题模拟试题补全短文概括大意词汇指导阅读理解例题习题卫生职称英语词汇指导完形填空概括大意历年试题阅读理解补全短文模拟试题例题习题综合职称英语完形填空历年试题模拟试题例题习题词汇指导阅读理解补全短文概括大意

商务英语翻译论文广告英语商务英语商务英语教学

无忧论文网

联系方式

Black-Scholes Model has been proved to be a significant innovation in the area of financial pricing

论文作者:佚名论文属性:作业 Assignment登出时间:2009-10-06编辑:steelbeezxp点击率:7550

论文字数:1200论文编号:org200910061116193643语种:英语 English地区:英国价格:免费论文

附件:模板org.pdf

关键词:Black-Scholes Modeloption pricing formulafinancial economists

Question 1.
(d)
Introduction


The Black-Scholes Model is a famous option pricing formula and was first introduced by two financial economists Fischer Black and Myron Scholes in the Journal of Political Economy in 1973. It has been proved to be a significant innovation in the area of financial pricing.


The Formula
The Nobel formula is written as:


Generally, the basic option valuation method is to divide the option value into two parts – intrinsic value and time value of the option. For instance, the intrinsic value of a stock call option is the underlying stock price minus the exercise price ( ). But the exercise should be adjusted by the time value of the money. Then, the “adjusted” intrinsic value is the stock price minus the present value of the exercise price ( ). As can be seen from the formula above,   is the intrinsic value. The time value of an option can be seen as some kind of volatility value which is implied in N(d1) and N(d2) of the formula above. The terms N(d1) and N(d2) serve as risk-adjusted probabilities of   and   respectively.


Assumptions


The Black-Scholes Pricing model, as other models, is based on a specific set of assumptions:
Firstly, the underlying stock prices ( ) are assumed to be random and stock returns are lognormally distributed. As all known, although the portfolio managers or other market participants may catch some stock returns’ long-term tendencies, stock returns are almost unpredictable, especially on the short run. Moreover, many empirical studies show that log returns are distributed the way close to the normal distribution; hence, the assumption is reasonable.
Secondly, the risk-free rate ( ) and volatility of the log return on the underlying stock are assumed to be constant (homoskedasticity). This assumption is always not the case in real world. The interest rate does not remain constant. In addition, the assumption of constant volatility is always violated in reality. More complex models are needed if the assumption of constant volatility is relaxed.
Thirdly, no taxes or transaction costs are considered. Most financial pricing models are based on this assumption. But unfortunately, taxes and transaction costs do have an impact on the options’ pricing. There is advanced methods to relax this assumption.
Fourthly, the underlying stock pays no dividends. Most stocks pay dividends. But this assumption can be relaxed by subtracting a discrete dividend adjusted term from the underlying stock price ( ) or dividing a continuous dividend yield adjusted term from the underlying stock price ( ).
Finally, the options are European options. Black-Scholes model cannot price early exercise options, whereas the binomial model can do. However, Black-Scholes model provide a way to better understand how the early exercise works.


Empirical evidence on option pricing


There have been plenty of empirical studies relating to the accuracy or otherwise of the Black-Scholes option pricing model. Most of these studies have been positive because the results generated from this pricing model are fairly close to the actual trading prices. The model does guide the market participants to trade on options. On the other hand, some papers also began to doubt the reliability of this accepted valuation model in practice. Commonly, there are several criteria to accept or reject a model.


论文英语论文网提供整理,提供论文代写英语论文代写代写论文代写英语论文代写留学生论文代写英文论文留学生论文代写相关核心关键词搜索。

共 1/3 页首页上一页123下一页尾页

英国英国 澳大利亚澳大利亚 美国美国 加拿大加拿大 新西兰新西兰 新加坡新加坡 香港香港 日本日本 韩国韩国 法国法国 德国德国 爱尔兰爱尔兰 瑞士瑞士 荷兰荷兰 俄罗斯俄罗斯 西班牙西班牙 马来西亚马来西亚 南非南非