Zijing Zhao
ABSTRACT
Options are crucial to global financial markets. However, there is rarely existing literature combining a specific option and a certain company, with simultaneous analysis and conclusions of the option. Based on the ordinary least square (OLS) regression and Black-Scholes (BS) model, we design two simulated options for Morgan Stanley, which are European options and power options. Then the option's value is identified in this article. Besides, through the sensitivity analysis of the two options and their related parameters, we get some results and conclusions about the characteristics of the two options. In general, the value of options is affected by independent variables and parameters. Compared with a European option, a power option has a higher risk and higher future expected return. This paper provides better advice for investors, on the premise of fully considering various possible situations, compare the advantages and disadvantages of the two options, and make their own investment choices.
- F. Black, M. Scholes, The pricing of options and corporate liabilities, J. Polit. Econ. 81 (3) (1973) 637–654.Google Scholar
- J. Cohen, F. Black, M. Scholes, The valuation of option contracts and a test of market efficiency, J. Finance 27 (2) (1972) 399–417.Google Scholar
- R. Ianier, Four Advantages of Options, 2020.Google Scholar
- 4Advantages of Options (investopedia.com)Google Scholar
- Morgan Stanely 2019 Form 10-K Annual Report, 2019.Google Scholar
- https://www.sec.gov/ix?doc=/Archives/edgar/data/895421/000089542120000265/msq4201910k.htmGoogle Scholar
- R. Merton, Theory of rational option pricing, Bell J. Econ. Manage. Sci. 4 (1) (1973) 141.Google Scholar
- Zhang, J., He, L., & An, Y. (2020). Measuring banks’ liquidity risk: An option-pricing approach. Journal of Banking & Finance, 111, 105703. http://doi.org/10.1016/j.jbankfin.2019.15703Google ScholarCross Ref
- Chandra Sekhara Rao, S., & Manisha. (2018). Numerical solution of generalized Black–Scholes model. Applied Mathematics and Computation, 321, 401-421. https://doi.org/10.1016/j.amc.2017.10.004Google ScholarDigital Library
- Korelasyon Ve Tekli Regresyon Analizi-En Küçük Kareler Yöntemi, Prof.Dr.A.KARACABEY Doç.Dr.F.GÖKGÖZ, Ankara Üniversitesi, Temmuz 2012Google Scholar
- Lesmana, D. C., & Wang, S. (2013). An upwind finite difference method for a nonlinear Black–Scholes equation governing european option valuation under transaction costs. Applied Mathematics and Computation, 219(16), 8811-8828. https://doi.org/10.1016/j.amc.2012.12.077Google ScholarDigital Library
- Zhang, H., Liu, F., Turner, l., & Yang, Q. (2016). Numerical solution of the time fractional Black-Scholes model governing european options. Computers & Mathematics with Applications (1987), 71(9), 1772-1783. http://doi.org/10.1016/j.camwa.2016.02.007Google ScholarDigital Library
- W. Kenton, Black Scholes Model, Investopedia, Feb 6, 2020.Google Scholar
- https://www.investopedia.com/terms/b/blackscholes.asp#:∼:text=The%20Black%2DScholes%20Merton%20(BSM,exercised%20before%20the%20expiration%20date.Google Scholar
- Jim Frost, Ordinary Least Squares, Statistics By Jim, 2021.Google Scholar
- https://statisticsbyjim.com/glossary/ordinary-least-squares/#:∼:text=Ordinary%20least%20squares%2C%20or%20linear,and%20the%20corresponding%20fitted%20values.Google Scholar
- Ordinary Least Squares, Wikepedia, the free encyclopedia, Jan 26, 2021.Google Scholar
- https://www.sec.gov/ix?doc=/Archives/edgar/data/895421/000089542120000265/msq4201910k.htmGoogle Scholar
Recommendations
Pricing American-Style Derivatives with European Call Options
We present a new approach to pricing American-style derivatives that is applicable to any Markovian setting (i.e., not limited to geometric Brownian motion) for which European call-option prices are readily available. By approximating the value function ...
Pricing American put options model with application to oil options
In this paper, we reformulate a problem of pricing American put options to linear complementarity problem. The space and the time are discretised with the finite difference method in the Crank-Nickolson approach, which leads to present the put option ...
No-arbitrage Pricing of European Options based on Trinomial Tree Model
ICSET 2021: 2021 5th International Conference on E-Society, E-Education and E-TechnologyNowadays, with the rapid development of the financial markets, financial derivatives have been taken more into researchers’ considerations, like Mehrdoust Farshid and Najafi Ali Reza (2017) have tried to find out a semi analytical formula[1]. ...
Comments