Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/313427 
Year of Publication: 
2019
Citation: 
[Journal:] Journal of Banking and Financial Economics (JBFE) [ISSN:] 2353-6845 [Issue:] 11 [Year:] 2019 [Pages:] 79-95
Publisher: 
University of Warsaw, Faculty of Management, Warsaw
Abstract: 
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 over-priced 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.
Subjects: 
options pricing
option markets
Black-Scholes model
Binomial model
Monte-Carlo Simulation model
Greek letters
JEL: 
C13
C15
G12
G13
G15
G17
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by-nc-nd Logo
Document Type: 
Article

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