Stock Options Pricing Using the Black-Scholes Formula

Posted July 25th, 2011 at 7:05 pm.

Abstract: Hao Jiang

Mentor: Leslie Cheng

An option is a contract that permits the owner to purchase or sell an asset at a fixed price until a specific date. To have a strong market in options, we need to be able to efficiently evaluate the approximate worth of the options. There are various solutions to accomplish this and my research project will focus on the Black-Scholes formula, a wildly applied mathematical tool used in the financial industry. This project explores the assumptions, derivation and properties of the Black-Scholes formula. It also studies how the Black-Scholes formula can be applied to make stock trading options, the derivatives of Black-Scholes option prices as well as its limitations in solving real-life problems. In cases where the Black-Scholes solution is insufficient, alternative mathematical models will be looked at to make better predictions of the stock option prices.

Filed under: 2011,Cheng, Dr. Leslie,Jiang, Hao,Uncategorized by Michelle Han

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