Research on the Pricing Model of Derivatives——Based on the Black-Scholes Model and Binomial Model

Research Article
Open access

Research on the Pricing Model of Derivatives——Based on the Black-Scholes Model and Binomial Model

Yingxi Wang 1*
  • 1 Nankai University    
  • *corresponding author 1814091@mail.nankai.edu.cn
Published on 10 November 2023 | https://doi.org/10.54254/2754-1169/44/20232231
AEMPS Vol.44
ISSN (Print): 2754-1177
ISSN (Online): 2754-1169
ISBN (Print): 978-1-83558-109-4
ISBN (Online): 978-1-83558-110-0

Abstract

The pricing of financial derivatives plays a significant role in risk management and financial transactions. The models of pricing are mainly divided into Black-Scholes Model and Binomial Model. The two models have different characteristics and distinguishing the models is helpful for price makers. The paper aims to analyse the distinction between the two models on the Huaxia Stock Exchange 50ETF by using Python. This paper selected the stock price, the volatility and the option price from the Eastmoney database. First, edit the formulas of two models and then introduce the parameters into the formula by Python and get the model calculated price. Comparison between the calculated prices helps to compare the two pricing models. The result is that Black-Scholes Model is more accurate and Binomial Model is more simplified which is suitable for new officers.

Keywords:

Black-Scholes Model, Binomial Model, financial derivatives, pricing model

Wang,Y. (2023). Research on the Pricing Model of Derivatives——Based on the Black-Scholes Model and Binomial Model. Advances in Economics, Management and Political Sciences,44,192-197.
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References

[1]. Amir Ahmad Dar, N.Anuradha. Comparison: Binomial model and Black Scholes model.Quantitative Finance and Economics,2018,230-245.doi:10.3934

[2]. Black F, Scholes M. The Pricing of Options and Corporate Liabilities[J]. Journal of Political Economy,1973,81(3):637-654

[3]. Cox,J.C, Ross,S.A and Rubinstein,M. Option Pricing: A Simplified Approach[J]. Journal of Financial Economics, 1979,7(3):229-263

[4]. Shi Zhang. Comparison of Pricing Methods of Financial Derivatives. Investment and Entrepreneurship,2021,32(21）：33-37

[5]. Zhifan,Cai, Fan Wu. Comparison and Analysis of Two Common Pricing Models of Financial Derivatives. Contemporary Economics,2018,10(20):66-67

Cite this article

Wang,Y. (2023). Research on the Pricing Model of Derivatives——Based on the Black-Scholes Model and Binomial Model. Advances in Economics, Management and Political Sciences,44,192-197.

Data availability

The datasets used and/or analyzed during the current study will be available from the authors upon reasonable request.

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About volume

Volume title: Proceedings of the 7th International Conference on Economic Management and Green Development

ISBN：978-1-83558-109-4(Print) / 978-1-83558-110-0(Online)
Editor：Canh Thien Dang
Conference website: https://www.icemgd.org/
Conference date: 6 August 2023
Series: Advances in Economics, Management and Political Sciences
Volume number: Vol.44
ISSN：2754-1169(Print) / 2754-1177(Online)

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References

[1]. Amir Ahmad Dar, N.Anuradha. Comparison: Binomial model and Black Scholes model.Quantitative Finance and Economics,2018,230-245.doi:10.3934

[2]. Black F, Scholes M. The Pricing of Options and Corporate Liabilities[J]. Journal of Political Economy,1973,81(3):637-654

[3]. Cox,J.C, Ross,S.A and Rubinstein,M. Option Pricing: A Simplified Approach[J]. Journal of Financial Economics, 1979,7(3):229-263

[4]. Shi Zhang. Comparison of Pricing Methods of Financial Derivatives. Investment and Entrepreneurship,2021,32(21）：33-37

[5]. Zhifan,Cai, Fan Wu. Comparison and Analysis of Two Common Pricing Models of Financial Derivatives. Contemporary Economics,2018,10(20):66-67

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