IDEAS home Printed from https://ideas.repec.org/a/aio/fpvfcf/v1y2010i12p137-146.html
   My bibliography  Save this article

Options evaluation - Black-Scholes model vs. binomial options pricing model

Author

Listed:
  • Ioan TRENCA
  • Maria Miruna POCHEA
  • Angela Maria FILIP

    (Babes-Bolyai University Cluj-Napoca)

Abstract

A huge number of financial institutions and companies use the options in risk management. A particularly important issue that arises when it comes to options is fixing their value. In this paper we present the classical models for valuing options: Black-Scholes model and binomial model. Existence of an analytical solution for the price of a European vanilla option allow analyzing how their prices respond to changes of variables and parameters. Options price response to these variables changes are virtually the sensitivity coefficients of the premium and main elements for measuring the risk that these financial assets involve when are used to define cover practices for such risks. In addition, the indicators facilitate the development of cash flows generated by the underlying asset, technique which can be useful if certain financial portfolio management strategies involve derivatives.

Suggested Citation

  • Ioan TRENCA & Maria Miruna POCHEA & Angela Maria FILIP, 2010. "Options evaluation - Black-Scholes model vs. binomial options pricing model," Finante - provocarile viitorului (Finance - Challenges of the Future), University of Craiova, Faculty of Economics and Business Administration, vol. 1(12), pages 137-146, December.
    • Handle: RePEc:aio:fpvfcf:v:1:y:2010:i:12:p:137-146
    as

    Download full text from publisher

    File URL: http://feaa.ucv.ro/FPV/012-17.pdf
    Download Restriction: no
    ---><---

    More about this item

    Keywords

    options evaluation; Black-Scholes model; binomial options pricing model;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:aio:fpvfcf:v:1:y:2010:i:12:p:137-146. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Alina Manta (email available below). General contact details of provider: https://edirc.repec.org/data/fecraro.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.