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Title: A study of relevance of Black-Scholes model on option prices of Indian stock market

Authors: Anubha Srivastava; Manjula Shastri

Addresses: Amity Business School, Amity University, Expressway, Noida 201301, India ' Amity Business School, Amity University, Expressway, Noida 201301, India

Abstract: In the modern world, with the continuous evolution of the financial market, there has been a continuous development of different financial instruments. Derivative trading is becoming an integral part of stock market .In recent years trading volume in stock market has increased tremendously which has led to the high volatility in the option prices. A derivative is a type of such evolved financial instrument which has attracted the financial marketers all over the world. An option is a financial contract between two or more parties whose value depends on a given underlying asset, and any change in the value of the underlying has a subsequent change in the value of the derivative contract. Black-Scholes option model is used for fair value pricing for option contracts. In this research work, an attempt has been made to find out the relevance of Black-Scholes model values with the market values for stock options. This paper aimed to find out the significant relationship between BSOPM and actual market price. As a conclusion, the study found out that the option values have insignificant relevance to the market values.

Keywords: options; Black-Scholes model; fair price; volatility; market value.

DOI: 10.1504/IJGFI.2018.091495

International Journal of Governance and Financial Intermediation, 2018 Vol.1 No.1, pp.82 - 104

Received: 24 Aug 2017
Accepted: 23 Oct 2017

Published online: 02 May 2018 *

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