AN EMPIRICAL INVESTIGATION OF THE BLACK-SCHOLES CALL OPTION PRICING MODEL WITH REFERENCE TO NSE
International Journal of BRIC Business Research (IJBBR), 6 (2):
01-11 (May 2017)Abstract
This paper investigates the efficiency of Black-Scholes model used for valuation of call option contracts written on Eight Indian stocks quoted on NSE. It has been generally observed that the B & S Model misprices options considerably on several occasions and the volatilities are ‘high for options which are highly overpriced. Mispriced worsen with the increase in volatility of the underlying stocks. In most of the cases options are also highly underpriced by the model. In this research paper, the theoretical options prices of Nifty stock call options are calculated under the B & S Model. These the oretical prices are compared with the actual quoted prices in the market to gauge the pricing accuracy.