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Project Advisor 1
The mathematical model for computing the value of European options has been discovered and known as the Black-Scholes model. Later on, the model has been modified by other people in order to value American options. In this project, we introduce the Black-Scholes model and another three analytical methods for American options on stocks paying a single dividend, which are the Black's approximation, the Roll-Geske-Whaley approximation, and the Barone-Adesi Whaley approximation. We compare the results of option prices computed by the three American option pricing methods to the actual prices in the financial market to examine their accuracy. We also compare the values obtained by our code to the MATLAB built-in functions. The result shows that in general, our code has better performances than the MATLAB code.
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This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License.
Pan, Yushi, "From Black-Scholes Model to Pricing Models of American Options: A Performance Comparison" (2019). Senior Projects Spring 2019. 35.
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