Detail publikace

Drawbacks and Limitations of Black-Scholes Model for Options Pricing

JANKOVÁ, Z.

Originální název

Drawbacks and Limitations of Black-Scholes Model for Options Pricing

Typ

článek v časopise - ostatní, Jost

Jazyk

angličtina

Originální abstrakt

The present paper focuses on the methods of derivative contract pricing. The basic differential equation of the popular Black-Scholes model for option contract pricing is derived. Furthermore, its less known modifications by Merton and Garman and Kohlhagen are pointed out. The paper refers to the significant drawbacks and limitations of the option pricing models that are based on constricting and unrealistic assumptions that often fail in comparison to the real market data. Attention is paid to the most serious problem, namely the issue of constant volatility, which is considerably disrupted in practice. Models implementing both stochastic and deterministic volatility in the original model are pointed out, their output being a more accurate option contract price.

Klíčová slova

Differential equations, financial derivatives, Black-Scholes model, GARCH, volatility.

Autoři

JANKOVÁ, Z.

Vydáno

10. 8. 2018

Nakladatel

IBIMA Publishing

ISSN

2166-000X

Periodikum

Journal of Financial Studies & Research

Ročník

2018

Číslo

1

Stát

Spojené státy americké

Strany od

1

Strany do

7

Strany počet

7

BibTex

@article{BUT149160,
  author="Zuzana {Janková}",
  title="Drawbacks and Limitations of Black-Scholes Model for Options Pricing",
  journal="Journal of Financial Studies & Research",
  year="2018",
  volume="2018",
  number="1",
  pages="1--7",
  doi="10.5171/2018.179814",
  issn="2166-000X"
}