comparative analysis of efficiency in Black Scholes model and the binomial tree in call options in tehran stock exchenge

Subject Areas : Stock Exchange

kourosh nasiri ¹ , gholamreza askarzadeh ^{2 *}

1 - Department of Financial Management,Yazd Branch, Islamic Azad University of Yazd, Iran
2 - Department of Financial Management,Yazd Branch, Islamic Azad University of Yazd, Iran

Received: 2022-04-12 Accepted : 2022-05-11 Published : 2023-03-21

Keywords: Efficiency, Black Scholes model, the binomial tree,

Abstract :

The financial markets of each country reflect the dynamism of that country's financial institutions and instruments. In developed financial markets, new tools have emerged to hedge trading risk. options is one of these tools, the price of which is a function of supply and demand. But there are pricing models in this market, the most widely used of which are the Black Scholes model and binomial . The purpose of this article is to evaluate the efficiency of these two methods in the option market to buy transactions on the Tehran Stock Exchange. For this purpose, 30 highly traded symbols during the years 2016-2020 have been selected and their prices have been estimated based on both models. To measure their efficiency based on the obtained regression models, R2 and regression beta have been used. The results show that based on R2 and beta variables, there is no significant difference between the mean scores of the two models and these two models have the same performance in the market. , the bid prices of both models are lower than the call options in the market, but there is no significant difference between the performance of Black Scholes and the binomial .