Experimental investigation of the Black Scholes pricing model in Tehran Stock Exchange call option transactions

Subject Areas : Financial Economics

Koresh Nasiri ¹ , Gholamreza Askarzadeh ²

1 - Department of Financial Management, Yazd Branch, Islamic Azad University, Yazd, Iran.
2 - Department of Financial Management, Yazd Branch, Islamic Azad University, Yazd, Iran (corresponding author)

Received: 2023-09-29 Accepted : 2023-12-01 Published : 2023-12-22

Keywords: Error Rate, Call Options, Key words: Black-Scholes, U-Tail JEL classification: G12,

Abstract :

AbstractWith the increasing progress of financial markets, human life has been directly and indirectly affected by financial markets. The financial markets of each country show the dynamics of financial institutions and instruments of that country. In the financial markets of advanced countries, financial instruments have been widely and continuously changing and improving in order to reach their maximum efficiency and on the other hand to minimize their investment risk. Therefore, new tools to cover the risk of transactions in the financial markets emerged. Trading option is one of these instruments whose price is subject to supply and demand like other financial instruments. But in this market, there are pricing models for this tool, the most important and widely used of which is the Black-Scholes pricing model. which is widely used among the traders of this tool for quoting. The purpose of this research is to measure the effectiveness of the Black-Scholes pricing model in the call option trading market in the Tehran Stock Exchange, the data used for which includes all published call option contracts in the Tehran Stock Exchange (including 1315 contracts published in the market in 26 basic asset symbols in 10 different industries and 25,760 trading days) in a 5-year period from 1395 to 1400, and during this path, error coefficients and U-tail indices were used to analyze the data. Results Research indicates that the suggested prices of the Black-Scholes model are priced higher than the price of call options. In addition, the percentage of deviations and U-theil in ITM profit call options is lower than that of OTM call options, so the pricing efficiency of the Black-Scholes model for the pricing of ITM call options It is more than the price of OTM call options. In addition, the amount of deviation of the suggested prices of the Black-Scholes model and transaction prices has decreased over time in the Tehran Stock Exchange.

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