Black-Scholes and Binomial Option Pricing Model: A Comparative Analysis

Authors

  • S. Gupta
  • A. Gupta

DOI:

https://doi.org/10.37591/rrjost.v6i3.29

Abstract

It is a well-known fact in the trading world that a portfolio is always exposed to price risk, which can occur anytime during the trading period, but the overall risk can be mitigated up to a certain level if a trader adopts relevant risk mitigation strategy before taking his/her position in the market. An option is one of the major derivative tools for hedging as well as risk management. There are two prevalent models which are accepted by most of the companies across the globes which are Black & Scholes options pricing model and binomial options pricing model. Hence, the main motive of conducting research in this topic is to do a comparative analysis of the two models by applying them in the five companies of different domain, so that the traders and the companies are clear with which model to apply in a difficult situation.

Keywords: Black and Scholes Option Pricing Model, Binomial Options Pricing Model, volatility, risk mitigation

Cite this Article Gupta S, Gupta A. Black-Scholes and Binomial Option Pricing Model: A Comparative Analysis. Research & Reviews: Journal of Statistics. 2017; 6(3): 1–9p. 

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Published

2017-12-04

Issue

Vol. 6 No. 3 (2017)

Section

Research Article

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