![]() ![]() ![]() doi: 10.1016/j.irfa.2005.10.003Ĭhesney M, Scott L (1989) Pricing european currency options: A comparison of the modified black-scholes model and a random variance model. doi: 10.1016/0304-4076(86)90063-1Ĭassese G, Guidolin M (2006) Modelling the implied volatility surface: Does market efficiency matter?: An application to mib30 index options. doi: 10.1086/260062īollerslev T (1986) Generalized autoregressive conditional heteroskedasticity. doi: 10.3934/DSFE.2021017īlack F, Scholes M (1973) The pricing of options and corporate liabilities. A modification term for Black-Scholes model based on discrepancy calibrated with real market data. Experimental results show that the modified model produces a better option pricing results when compare to market data.Ĭitation: Xiaozheng Lin, Meiqing Wang, Choi-Hong Lai. Using the actual discrepancies of the results of the Black-Scholes model and the market prices, the modification term related to the implied volatility is derived. In contrast to the existing modifications to the Black-Scholes model, this paper proposes the concept of including a modification term to the B-S model itself. Most current modifications to the B-S model rely on modelling the implied volatility or interest rate. However, empirical analysis shows that there are discrepancies between the option prices obtained from the B-S model and the market prices. The Black-Scholes option pricing model (B-S model) generally requires the assumption that the volatility of the underlying asset be a piecewise constant. ![]()
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