Pricing of Options

Abstract

This paper takes the initiative to value stock options by using the Nobel winning Black-Scholes-Merton Model and the Binomial Options Pricing Model. The sole objective of this paper is to investigate whether the models can be utilized to generate investment opportunities for Calls and Puts by valuation. Ten of the most well known large cap U.S firms companies have been selected for this paper. The paper begins with a brief introduction of Derivative products followed by the literature review which covers some of the most well known models for the pricing of options. The fourth portion analyses the empirical findings after the paragraph on methodology. The concluding paragraph sheds light on the application aspect of the models for identifying potential options.