Optional Trading Pricing with a New Analytic Method for the Black-Scholes Equation

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abvali mehdi; KHALILI ARAGHI MARYAM; Hassanabadi Hasan; YAGHOOBNEZHAD AHMAD

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Journal: JOURNAL OF FINANCIAL MANAGEMENT STRATEGY Year:2019 | Volume:7 | Issue:26 Page(s): 135-155

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Title

Optional Trading Pricing with a New Analytic Method for the Black-Scholes Equation

Author(s)

abvali mehdi | KHALILI ARAGHI MARYAM | Hassanabadi Hasan | YAGHOOBNEZHAD AHMAD | Issue Writer Certificate

Keywords

OptionQ2

Black-Scholes EquationQ1

Schrödinger-Like EquationQ1

Nikiforov-Uvarov MethodQ1

Abstract

The Black-Scholes pricing theory is one of the most important methods for valuating transaction Options. This equation is used to price a variety of European Options. In this paper, a new method was developed to prove and improve the Black-Scholes Equation by focusing on the Black-Scholes main Schrö dinger-like equation and solving this equation using the Nikiforov-Uvarov Method. While investigating the possibility of improving the Black-Scholes Equation with this method, a new equation for the pricing of transaction Options was presented and tested. The goals of this study include increasing the accuracy of pricing Options by using the equation provided, especially for high-value trades; checking a logical solution in a new way; comparing outputs with the numerical solution; and innovating the final formula based on Lagrange polynomial functions. The results showed that a different proof for the Black-Scholes Equation is possible by solving the differential equation by the Nikiforov-Uvarov Method and, at the 95% confidence level, there is no significant difference between the price of the two main Black-Sholes groups and the new model. In order to compare the output of the new model with that of the Black-Sholes main model, the data of 50 coin Options in Iran Fara Bourse from 2015 to 2018 were used, and two independent groups were compared using the Mann-Whitney U test.

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APA: Copy

abvali, mehdi, KHALILI ARAGHI, MARYAM, Hassanabadi, Hasan, & YAGHOOBNEZHAD, AHMAD. (2019). Optional Trading Pricing with a New Analytic Method for the Black-Scholes Equation. JOURNAL OF FINANCIAL MANAGEMENT STRATEGY, 7(26 ), 135-155. SID. https://sid.ir/paper/404884/en

Vancouver: Copy

abvali mehdi, KHALILI ARAGHI MARYAM, Hassanabadi Hasan, YAGHOOBNEZHAD AHMAD. Optional Trading Pricing with a New Analytic Method for the Black-Scholes Equation. JOURNAL OF FINANCIAL MANAGEMENT STRATEGY[Internet]. 2019;7(26 ):135-155. Available from: https://sid.ir/paper/404884/en

IEEE: Copy

mehdi abvali, MARYAM KHALILI ARAGHI, Hasan Hassanabadi, and AHMAD YAGHOOBNEZHAD, “Optional Trading Pricing with a New Analytic Method for the Black-Scholes Equation,” JOURNAL OF FINANCIAL MANAGEMENT STRATEGY, vol. 7, no. 26 , pp. 135–155, 2019, [Online]. Available: https://sid.ir/paper/404884/en

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