Pricing of options

Abstract

Investigated use of Black-Scholes-Metron Model and Binomial Model to generate investment opportunities for Calls and Puts by valuation. Ten of the most well known large cap US companies were selected for valuation. Data were collected from National Association of Securities Dealers Automated Quotations online website. Forty valuations were performed. Only five provided result close to the actual, rest thirty five were either undervalued or overvalued. Though Black-Scholes-Metron Model found better than Binomial Model, both the models were unable to provide any value for options that were out of money. Models could not not be utilized in options that had no intrinsic value.