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Comparison of European Option Pricing Models at Multiple Periods

Comparison of European Option Pricing Models at Multiple Periods
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Author(s): Amir Ahmad Dar (B. S. Abdur Rahman Crescent Institute of Science and Technology, India), N. Anuradha (B. S. Abdur Rahman Crescent Institute of Science and Technology, India)and Ziadi Nihel (High Business School of Manouba, Tunisia)
Copyright: 2021
Pages: 18
Source title: Handbook of Research on Engineering, Business, and Healthcare Applications of Data Science and Analytics
Source Author(s)/Editor(s): Bhushan Patil (Independent Researcher, India)and Manisha Vohra (Independent Researcher, India)
DOI: 10.4018/978-1-7998-3053-5.ch008

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Abstract

The point of this chapter is to think about the correlation of two well-known European option pricing models – Black Scholes Model and Binomial Option Pricing Model. The above two models not statistically significant at one period. In this examination, it is shown how the above two European models are statistically significant when the time period increases. The independent paired t-test is utilized with the end goal to demonstrate that they are statistically significant to vary from one another at higher time period and the Anderson Darling test being used for the normality test. The Minitab and Excel programming has been utilized for graphical representation and the hypothesis testing.

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