Mthuli Ncube, Stephen Satchell
Abstract
In this paper the authors develop a bias-adjusted Black and Scholes option pricing model using arguments based on Jensen's Inequality. The properties of the Black and Scholes option price are analysed. Some calculations from simulation that resembles UK data on the FT-SE 100 index European options are presented.
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In this paper the authors develop a bias-adjusted Black and Scholes option pricing model using arguments based on Jensen's Inequality. The properties of the Black and Scholes option price are analysed. Some calculations from simulation that resembles UK data on the FT-SE 100 index European options are presented.
Key concepts: Black–Scholes model, Economics, Valuation of options, Index (typography), Econometrics, Mathematical economics, Financial economics, Computer science