Option pricing: utilization of an alternative option pricing model to price dollar futures options and comparison with Black s model / Formação do preço de opções: utilização de um modelo alternativo para a formação do preço de opção sobre futuro de dólar e comparação com o modelo de Black

AUTOR(ES)

Alexandre Andrade de Mello

DATA DE PUBLICAÇÃO

2005

RESUMO

The utilization of the Black-Scholes option pricing model is widespread, in both the academe and the market. Additionally, the literature related to its generalizations and adaptations is vast. Of particular importance are works concerning new sufficient conditions for existing risk-neutral option pricing equations. Under a new set of propositions on distributions and preferences, Câmara (2003) derived new analytical solutions for the price of European-style contingent claims. The objective of the present study was to adapt and test an option pricing model that was derived by Câmara (2003). Particularly, the tested model assumes that the underlying asset, in this case the US dollar futures contract traded on the Brazilian Mercantile &Futures Exchange, follows a negatively skew lognormal distribution. The performance of the alternative model was compared to that of the Black model, the standard model used in the market to price such options. More specifically, the performances of both models were measured against the market prices of US dollar futures options. Also, considerations about the validity of the negative skew lognormal hypothesis were made and a mathematical analysis of the differences in the prices generated by the two models was carried out. In the end, although the alternative model produces, in some cases, prices that are closer to the market’s, the evidences suggest that, in general, the Black model performs better than the alternative one.

ASSUNTO(S)

black-scholes precificação dólar options pricing black-scholes opções negative skewness us dollar assimetria negativa

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