Options Pricing by Monte Carlo Simulation, Binomial Tree and BMS Model: a Comparative Study

• Autorzy: Ali Bendob , Naima Bentouir
• Języki publikacji: EN

Abstrakty

EN

Investment behaviour, techniques and choices have evolved in the options markets since the launch of options trading in 1973. Today, we are entering the field of Big Data and the explosion of information, which has become the main feature of science, impacts investors' decisions and their trading position, particularly in the financial markets. Our paper aims to testing the effectiveness of the most popular options pricing models , which are the Monte Carlo simulation method, the Binomial model, and the benchmark model; the Black-Scholes model, when we ignore/take on account the Moneyness categories and different time to maturities; five months, one year, and two years, in addition to comparing these models, we will then test the effect of each model on the prediction of the current options prices, using the regression analysis, and the Nifty50 option index during the period of 25/07/2014 to 30/06/2016. The result shows that all models are overpriced in all Moneyness categories with a high level of volatility in In-the money category, other finding concludes that the Monte Carlo Simulation method is outperforming when the volatility is lower, while the Black-Sholes model and the Binomial model are outperforming in the entire sample with ignoring the Moneyness. (original abstract)

Słowa kluczowe

EN

Options pricing; Monte Carlo simulation; Econometric models; Black-Scholes model

PL

Wycena opcji; Symulacja Monte Carlo; Modele ekonometryczne; Model Blacka-Scholesa

• Czasopismo: Journal of Banking and Financial Economics
• Rocznik: 2019
• Numer: nr 1(11)
• Strony: 79--95

Twórcy

autor

Ali Bendob

• Institute of economic sciences, management, and commercial sciences, LMELSPM Laboratory at university center of Ain Temouchent, Algeria

autor

Naima Bentouir

• Institute of economic sciences, management, and commercial sciences, LMELSPM Laboratory at university center of Ain Temouchent, Algeria

Bibliografia

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Identyfikatory

DOI

10.7172/2353-6845.jbfe.2019.1.4