Suppose r (risk-free rate of interest) =0.07. Here we compare results from DF formulas with those of B-S (Black- Scholes) formulas in options pricing.

The comparative analysis for DJX

Time: Dec. 24, 2002

Breed: The option contract on DJX

Maturity: Expires After: Fri 19-Dec-03.

Underlying: Close point of DJX at current date, 84.48.

In table 1, there are the prices on Dec. 24, 2002, which were the closing prices traded actually in the United States option market (TP), the call and put options prices calculated by DF structure formulas, (DF), and the call and put options prices calculated by B-S formulas, (B-S). From table 1, we see the DF prices are closer to the actual trading prices than the B-S prices. If taking the strike price, X=88, and T=199 for example, the variety of call and put option prices calculated by DF formulas and B-S formulas are respectively shown in figure 6.1(a) and 6.1(b).

 

Prof. Feng Dai, Prof. Zifu Qin

Next: The comparative analysis for MSFT

Summary: Index