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The Analysis of Black-Scholes Model of Option Pricing with Time-Varying Parameters on Share Prices for Capital Market |
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PP: 673-678 |
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doi:10.18576/amis/180319
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Author(s) |
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Innocent U. Amadi,
Nmerukini Akani,
Chisara P. Ogbogbo,
Simon I. Aboko,
Adaobi M. Udoye,
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Abstract |
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| This paper studied the perception of European option which is geared towards valuation of financial assets at a prescribed time in the future. In particular, the analytic formula of Black-Scholes model was considered for share prices of Fidelity and Access banks which gave closed form prices of call options. The explicit price on the variations of maturity days is found accordingly. The closed form prices of both banks were compared. The simulation results show that: the share price determines the value of call option prices. An increase on the maturity days dominantly increases the value of call option for both Fidelity Bank, Access Bank and their future merger Bank. Merging of the two banks improved the value of call option prices. Fidelity bank has a good maximum value of call option prices during the period of investments, Kolmogorov ?Smirnov (KS) test shows that the two call option prices (Fidelity and Access) do not come from a common distribution, the normality test of both banks are not significant. The results presents to the Banks management, a basis for taking vital decisions, depending on the levels of their investments.
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