A Comparison of the Black-Scholes Option Pricing Model and Its Alternatives | Zendy

ABM Shahadat Hossain | Zendy; Maliha Tasmiah Noushin | Zendy; Kamrul Hasan | Zendy

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A Comparison of the Black-Scholes Option Pricing Model and Its Alternatives

Author(s) -

ABM Shahadat Hossain,

Maliha Tasmiah Noushin,

Kamrul Hasan

Publication year - 2019

Publication title -

dhaka university journal of science

Language(s) - English

Resource type - Journals

eISSN - 2408-8528

pISSN - 1022-2502

DOI - 10.3329/dujs.v67i2.54581

Subject(s) - greeks , black–scholes model , constant elasticity of variance model , economics , valuation of options , moneyness , mathematical economics , econometrics , elasticity (physics) , benchmark (surveying) , call option , mathematics , financial economics , implied volatility , thermodynamics , volatility (finance) , physics , geodesy , sabr volatility model , geography

In this paper we estimate European put option price by using awell-established option pricing model, namely, the Constant Elasticity of Variance (CEV) model for the elasticity parameter β< 2 and then compare it with the benchmark Black-Scholes (BS) model. We calculate the Greeks under the CEV model for β=0,1 and 1.95 and compare them with that of the B-S one. Finally, we investigate the put price and Greeks values for at-the-money (ATM), in-the-money (ITM) and out-of-the-money (OTM) situations. Dhaka Univ. J. Sci. 67(2): 105-110, 2019 (July)

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