Exploring the Effect of Varying Volatility in the Black-Scholes Option Pricing Model

V. A. Vaghela¹ , R. M. Gor²

Section:Research Paper, Product Type: Isroset-Journal
Vol.6 , Issue.1 , pp.33-40, Feb-2019

CrossRef-DOI:   https://doi.org/10.26438/ijsrmss/v6i1.3340

Online published on Feb 28, 2019

Copyright © V. A. Vaghela, R. M. Gor . This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
 

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Abstract :
Derivatives trading are a core part of the Stock Market in the current era. Trading volumes in stock options have grown up tremendously during recent years. Black-Scholes is a pricing model used to determine the fair price or theoretical value for a European call or a put option. The objective of this paper is to price the derivatives by incorporating volatility which is assumed to be constant in the Black-Scholes model. We observe through a case study that we can price the options better by change in volatility due to change in stock price.

Key-Words / Index Term :
Black-Scholes model, European call &put option, volatility

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