Drawbacks and Limitations of Black-Scholes Model for Options Pricing

Kód výsledku v IS VaVaI

<a href="https://www.isvavai.cz/riv?ss=detail&h=RIV%2F00216305%3A26510%2F18%3APU128623" target="_blank" >RIV/00216305:26510/18:PU128623 - isvavai.cz</a>

Výsledek na webu

<a href="http://dx.doi.org/10.5171/2018.179814" target="_blank" >http://dx.doi.org/10.5171/2018.179814</a>

DOI - Digital Object Identifier

<a href="http://dx.doi.org/10.5171/2018.179814" target="_blank" >10.5171/2018.179814</a>

Jazyk výsledku

angličtina

Název v původním jazyce

Drawbacks and Limitations of Black-Scholes Model for Options Pricing

Popis výsledku v původním jazyce

The present paper focuses on the methods of derivative contract pricing. The basic differential equation of the popular Black-Scholes model for option contract pricing is derived. Furthermore, its less known modifications by Merton and Garman and Kohlhagen are pointed out. The paper refers to the significant drawbacks and limitations of the option pricing models that are based on constricting and unrealistic assumptions that often fail in comparison to the real market data. Attention is paid to the most serious problem, namely the issue of constant volatility, which is considerably disrupted in practice. Models implementing both stochastic and deterministic volatility in the original model are pointed out, their output being a more accurate option contract price.

Název v anglickém jazyce

Drawbacks and Limitations of Black-Scholes Model for Options Pricing

Popis výsledku anglicky

The present paper focuses on the methods of derivative contract pricing. The basic differential equation of the popular Black-Scholes model for option contract pricing is derived. Furthermore, its less known modifications by Merton and Garman and Kohlhagen are pointed out. The paper refers to the significant drawbacks and limitations of the option pricing models that are based on constricting and unrealistic assumptions that often fail in comparison to the real market data. Attention is paid to the most serious problem, namely the issue of constant volatility, which is considerably disrupted in practice. Models implementing both stochastic and deterministic volatility in the original model are pointed out, their output being a more accurate option contract price.

Druh

J_ost - Ostatní články v recenzovaných periodicích

CEP obor

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OECD FORD obor

50206 - Finance

Projekt

—

Návaznosti

S - Specificky vyzkum na vysokych skolach

Rok uplatnění

2018

Kód důvěrnosti údajů

S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů

Název periodika

Journal of Financial Studies & Research

ISSN

2166-000X

e-ISSN

—

Svazek periodika

2018

Číslo periodika v rámci svazku

1

Stát vydavatele periodika

US - Spojené státy americké

Počet stran výsledku

7

Strana od-do

1-7

Kód UT WoS článku

—

EID výsledku v databázi Scopus

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