Option Pricing Methods
| Author: | Mgr. Viktor Chrobok |
|---|---|
| Year: | 2010 - summer |
| Leaders: | PhDr. Petr Gapko Ph.D. |
| Consultants: | |
| Work type: | Finance, Financial Markets and Banking Masters |
| Language: | English |
| Pages: | 75 |
| Awards and prizes: | |
| Link: | |
| Abstract: | The diploma thesis is focused on the option pricing methods. There are described basic features of the option contracts and the types of them. Then a description of 6 pricing methods is given – the Black-Scholes model, the French Black-Scholes model, the Binomial Model, the Quadratic approximation model, the Bjerksund-Stersland model and the Jump-Diffusion model. The empirical part contains an analysis of the performance of all models on the real market data. It was shown that all models except for the Jump-Diffusion one fit the data very well, yet it was impossible to determine the best one. The evidence suggests that it is better to plug a few-days-delayed implied volatility than the historical one into all of the models. It was observed that the models for pricing European options are suitable even for the American ones. |
