Aileen Wang

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An Analysis of Dynamic Applications of
Black-Scholes

• Aileen Wang
• Period 5

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Purpose
Investigate Black-Scholes model Apply the B-S
model to an American market Dynamic trading vs.
fixed-time trading
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Scope of Study

• Analysis of input variables
• What are they?
• How will they be obtained?
• What formulas are necessary to calculate them?
• Making the model dynamic

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Related Studies
1973 Black-Scholes created 1977 Boyles Monte
Carlo option model Uses Monte Carlo applications
of finance 1979 Cox, Ross, Rubenstiens
bionomial options pricing model Uses the binomial
tree and a discrete time-frame Roll, Geske, and
Whaley formula American call, analytic solution
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Background Information
Black-Scholes Black-Scholes Model Black-Scholes
equation partial differential equation Catered
to the European market Definite time to
maturity American Market Buy and sell at any
time More dynamic and violatile
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Procedure and Method
Coding classes Stock class, B-S function Main
language Java Outputs Series of calls and
puts Spreadsheet, time-series plot Inputs
Price Volatility Interest rate
Test data and historical data Accuracy price can
be compared to a calculator or historical data.
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Results
Explore Option pricing with mathematics Difference
s in the USA and Euro markets Further
research Comparison with other mathematical
models Application into markets in other countries