Please use this identifier to cite or link to this item: https://hdl.handle.net/10356/68772
Title: A review on Black-Scholes model
Authors: Yang, Yang
Keywords: DRNTU::Engineering
Issue Date: 2016
Abstract: The Black-Scholes model has been served as the most fundamental model in option pricing for over four decades. Its derivation is based on ideal assumptions which are impossible in practice. Empirical evidences showed that the Black-Scholes model provides reasonable theoretical estimations of option prices most of the time; however, in some extreme situations the estimated results deviate far from observed prices. The reason of this deviation originates from the impractical assumptions. More than abundance of alternatives have been derived to complement the Black-Scholes model but the majority of them are history-fitting models. In this report, influential and remarkable theoretical extensions of the Black-Scholes model are reviewed. Each of these extensions improves the original model by relaxing certain assumption(s) and provides a pragmatic estimation of option prices.
URI: http://hdl.handle.net/10356/68772
Rights: Nanyang Technological University
Fulltext Permission: restricted
Fulltext Availability: With Fulltext
Appears in Collections:MAE Student Reports (FYP/IA/PA/PI)

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