Asian

n Journal of F
Finance & Acccounting
ISSN 19946-052X
2012, Vol. 4, No. 2

A Feasiibility Analys
A sis of Black-Sccholes--Merton
n
Diffeerentiall Equattion Moodel forr Stock Optionn Pricin
ng by
Usinng Histoorical Volatili
V ity : Wiith Refference to Seleected
Stock
k Optioons Traaded in NSE
Dr. R
Rekha Kala A.M.
Proffessor of Fin
nance

m Lal Dev Pandey (Co

Dr. Shyam orresponding Author)
Associatee Professor of Finance, Alliance University
U
School of Busines s, Bangalorre, Karnatak
ka, India
E-maiil: [email protected], shyaamlal.pandey
y@alliance .edu.in

Receiveed: June 29,, 2012 Accepted:

A JJuly 25, 201
12 Pub
blished: Deccember 1, 2012
2
doi:10.55296/ajfa.v44i2.2022 URL: htttp://dx.doi.o
org/10.5296/ajfa.v4i2.22022

Abstract
In todayys financiaal world theere is a greaat need to prredict the vaalue of the assets, usin
ng which
strategic decisionss can be maade to makke short term m or long term
t capitall gains. Duue to the
dynamiic and uncertain naturee of the finaancial mark kets, the preediction of tthe asset prrices are
really ddifficult. Maany models have been ddeveloped to t predict th
he option priices in the financial
f
market. The certainnity of thesee models to predict the option prices to the moost accuratee level or
to the llevel of miinimum dev viation is qquestionable. This stu udy is aimeed at analyzzing the
feasibility of Blackk - Scholes Merton ddifferential equation
e moodel for stocck option prricing in
Indian sstock exchaanges. The result
r of thi s study can
n be used to predict the suitability of using
Black - Scholes Merton diffferential equuation mod del to predicct stock optiion prices in
n Indian
market. Further thee regression n analysis haas been useed to see thee impact of time to exp piry over
the optiion price annd anova tesst has been used to cheeck whetherr the mean difference betweenb
expecteed price as computed by y Black - Sccholes Merrton differen ntial equatioon model annd actual
price haave any siggnificant diifference. T The result of
o analysis found that Black - Sccholes
Merton model is morem usefull in call optioon pricing than the put option priccing and also o impact
of timinng is more relevenat
r for put optionn pricing thaan for call option
o pricinng.

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n Journal of F
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2012, Vol. 4, No. 2

Keywords: Optionn, Black-Sch

holes Merrton, Pricing
g, Differenttial equationn, NSE, Sto
ock

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2012, Vol. 4, No. 2

Introdu
uction
Financee is one of thhe most dyn
namic area iin the modeern corporate arena andd in a real seense, it is
cornersttone of thee free enterrprise systeem. Due to high volattility and uuncertain beehaviour
financiaal instrumennts have beccome compplex and it is undergoinng constant change in response
r
to shiftts in economic conditiions. In toddays highlly volatile and dynam mic world, financial
f
marketss have contiinued to prooduce a mulltitude of neew productss including m
many new formsf of
derivatiives, alternnative risk transfer pproducts, ex xchange traaded fundss, and variiants of
tax-dedductible equity.
The dayys have gonne when simmple busineess graduatees were maanaging the world of corporate
finance now area of
o finance iss controlled by mathem
maticians andd computerr scientists.
In the llast 30 yearrs derivativ ves have beecome increeasignly im mportant in ffinance. Deerivative
productts serve the vitally imp portant econnomic functtions of pricce discovery ry in the underlying
market and risk managemen
m t tools by facilitating the trading of risks among thee market
particippants. Pricinng is very im
mportant in ooptions conttract. Option ns traders usse a pricing formula
to deterrmine call anda put opttions pricess. Many mo odels have been
b develooped to preedict the
option pprices in thee financial market.
m The certainity ofo these mod dels to prediict the optio
on prices
to the most accurrate level or to the level of minimum m deeviation is questionab ble. The
Black-S Scholes moddel is consid dered as a vvery elegantt piece of reesearch intoo option pricces. The
model uuses ideas from
f the Bro
ownian mottion and oth her theoriess based on random waalk. The
model iinvolves cerrtain inheren nt assumptioons such as log-normall distributionn of the stocck price,
constannt volatility during the tenure
t of thhe option, in
nterest rate, exercise prrice and stocck price.
In the m
modern finannce theory Black
B - Schholes Mertton differen ntial equatioon model (19 970) has
promineent place sppecially afteer 1997 wheen Robert MertonM and Myron Schholes were awarded
a
the Nobbel prize forr economicss. Sadly, Fisscher Black k died in 19995, otherwisse he too haave been
one of tthe receipiennt of the priize (Hull & Basu 2010).
BlackScholes moodel
The datta inputs to this
t model are a current sstock price, exercise priice, expecteed volatility,, interest
rate andd time to exxpiry. In this model priicing of an option invo olves construructing a rep
plicating
hedge pportfolio commprising a long
l positioon in stock and
a a short position
p in a zero-coupo on bond.
The heddge portfoliio will be co onstituted inn such a waay that at an
ny given poiint of time its
i value
will alw
ways be equual to the opttions pricee at that timee. The propoortion of stoocks and boonds will
be deterrmined by thet Black-S Scholes form mula.As thee formula consists of cconstantly changing
c
factors, the portfollio mix has to be consttantly adjussted. So the portfolio iss called as dynamic
d
portfoliio and the acct of maintaaining the pportfolio in balance
b is called as heddge rebalanccing.
BLACK
K SCHOL
LES FORM
MULA FOR
R OPTION
N PRICING
G:
1 2
2 1

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2012, Vol. 4, No. 2

ln 2
1

2 1
Here inn this formulla,
N(.) = ccumulative normal
n distribution funnction
ln = Naatural logaritthm
S = Spoot price of sttock
X = Exeercise pricee of the optio
on
r = Annnual risk free rate of retturn
t = Tim
me to expiry of the optio
on
= Annnual volatillity of the sttock
One of tthe assumpttions and lim
mitations off the Black Scholes model
m is thatt the asset pays zero
dividennd. This cannnot be the case with all the asseets. In 19733, Robert M Merton prov vided an
analysiss of Black & Scholes model
m in whhich he sugggested adjusttments to taake care of dividend
d
paymennts. So this helped
h in ovver coming one of the limitations
l of Black SScholes mo odel.
BLACK
K SCHOL
LES MER
RTON FO
ORMULA:
1 2
2 1

ln 2
1

2 1
Here inn this case,
d = Annnual dividennd yield
Problem
m Statemen
nt
Using thhe Black Scholes Merton
M moddel to calculaate the expeected call opption and pu
ut option
prices ffor various expiry
e datess through daata gathered
d from NSE E website foor stock optiions and
comparre it with thet actual stock optioon price, to find out whether B Black Sccholes
Merton(B-S-M) model is feasible in preddicting optio on prices in Indian mark rket.
Objectiives
1. To test the viability off Scholes Merton mo
odel using reeal time dataa from NSE
E.

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2012, Vol. 4, No. 2

2. To test the feasibility of Black S

Scholes Merton
M mod
del in Indiann scenario by using
real time data
d from NS SE.
3. To measurre the impacct of changees in time to
o expiry on the
t option pprices using Black
Scholes Merton
M moddel.
4. To test the significancce of the diffference betw
ween the mean
m of estim
mated price and
actual pricee.
Research Design
In this rresearch papper, real tim
me values arre taken fromm the NSE website
w andd the compoonents of
Black Scholes - Merton
M mod del are calcuulated and substituted
s in
i formula aand we arriv
ve at the
expecteed price of option.
o We also take tthe actual price of the option from m NSE web bsite and
comparre it with thee calculated d price of opption. Throuugh this we come to a cconclusion whether
Black-S Scholes-Merton model is feasible ffor option pricing
p in In
ndia.
Data C
Collection Methods
M and Sources
This ressearch is baased on reaal time secoondary data collected from
fr Nationnal Stock Exchange
(NSE) dderivative segment. Other relevant nt informatioon has been collected frfrom past stuudies on
similar subject. Real time dataa has been taaken for eacch trading day
d starting w with 16/8/2
2011 and
ending with 29/9/22011. To makem this sttudy more feasible
f 5 different
d stoocks represeenting 5
differennt industriess has been picked up oon the basis of markett capitalizattion and vo olume of
trade.
Tools oof Analysis
Study is based upoon applicatiion of blackk scholes model
m and testing
t of thhis model in
n indian
derivatiive segmentt. For the testing
t purppose Paired Samples Test,
T Regresssion Analy ysis and
ANOVA A has been used. Otheer statisticall tools used in study include Standdard deviatio
on, beta,
ratio etcc.
Hypoth
heses
H1: Theere is no siggnificant diffference bettween the exxpected optiions price ccomputed by
y B-S-M
model bby taking hiistorical vollatrility and actual pricee determineed by markeet forces.
H2: There is no im mpact of len
ngth of tim
me to expiry
y on the diff
fference betw
tween expeccted and
actual ooptions pricee.
H3: Blaack- Schole - Merton model
m gives iidentical ressult for both
h call optionn price as weell as put
otion prrice.
Literatture Review
w
Numbeer of studiees can be traced
t out on black scholes
s mod del. Here w we are startiing with
Black aand Scholess (1973) stu
udy that wass based on an empiricaal investigaations and conclude
c
bias wiithin the Black-Scholees model inn terms of moneynesss and matuurity. MacB Beth and

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Mervillle (1980)1 tested the Black Schooles model against the constant ellasticity of variance
v
(CEV) m model, which assumes volatility cchanges wheen the stock k prices chan
anges. Blattb
berg and
2
Gonedees (1974) suggest
s volaatility of thee underlying
g stock is stochastic and
nd random.
In the m
modern finannce theory Black
B - Schholes Mertton differen
ntial equatioon model (19970) has
promineent place sppecially afteer 1997 wheen Robert Merton
M and Myron Schholes were awarded
a
the Nobbel prize forr economicss. Sadly, Fisscher Blackk died in 199 95, otherwisse he too haave been
one of tthe receipiennt of the priize (Hull & Basu 2010).
Bhattaccharya, M. (1980)3 in his
h paper Emmpirical propperties of th
he Black Schholes formu
ula under
ideal coonditions, examined th he "Black-S choles" meethod for pricing, its fuundamentalss and its
applicattions in the 21st centurry economyy.
Radu, TTurcan(20100)4,in their paper BL LACK-SCHOLES MOD DEL USED D TO EVA ALUATE
STOCK KS OPTION NS mentio oned that Paartial differrential equaation, parabbolic Black--Scholes

type: V
V/t + 1/2 S V/S + rS V/S - rrV=0 is useed in evaluatting equity ooptions, thaat paying
constannt and contiinue dividennds or in evvaluate options in whiich interest rate, volatiility and
dividennd are depenndent on tim
me.
Heston,, Steven L.; L Loewen nstein, Marrk; Willardd, Gregory A (2007) 5 found th hat The
Black-S Scholes-Merton option n valuationn method involves
i deeriving andd solving a partial
differenntial equatioon (PDE). But
B this metthod can geenerate multiple valuess for an opttion. We
providee new solutions for thee Cox-Ingerrsoll-Ross (CIR)( term structure m model, the constant
elasticitty of variannce (CEV) model, annd the Hestton stochastic volatilitty model. Multiple
M
solutionns reflect asset
a pricin
ng bubbles, dominated d investmen nts, and (ppossibly inffeasible)
arbitragges. We proovide condiitions to rulle out bubb bles on underlying pricces. If theyy are not
satisfiedd, put-call parity
p mightt not hold, A
American calls
c have no
n optimal eexercise pollicy, and
lookbacck calls have infinite vaalue. We claarify a longstanding coonjecture off Cox, Ingerssoll, and
Ross.
Scott MMcKenzie, Dionigi Geerace, Zafffar Subedarr, (2007) 6 in their paaper An em mpirical
investiggation of thhe Black-Sccholes moddel: Eviden
nce from th
he Australiaan stock exxcahnge
evaluatees the probbability of an exchangge traded European
E caall option bbeing exerccised on

1
MacBeeth, J. D., annd Merville, L.L J. (1980). Tests of the Black-Schole
B es and Cox ccall option vaaluation
models. Journal of finance,
fi 35(2)), 285-301.
2
Blattbberg, R. C., and Gonedes, J. (1974). A comparison n of the stablle and studennt distributions as
statisticaal models forr stock pricess. Journal off business, 47(2), 244- 2880.
3
Bhattaacharya, M. (1980). Emppirical properrties of the Black
B Scholess formula unnder ideal co
onditions.
Journal of financial and quantita
ative analysiss, 15(5), 108
81-1105.
4
Turcann. (2010) Annals of the University
U off Oradea, Eco
onomic Scien nce Series, 2 010, Vol. 19 Issue 2,
p795-7999,
5
Hestonn, Steven L.; Loewenstein n, Mark; Willlard, Gregorry A.(2007), Review off Financial Sttudies,
Mar2007, Vol. 20 Isssue 2, p359-3 390, 32p
6
d Subedar, Z.,, (2007)An empirical inveestigation off the Black-S
McKennzie, S.; Geraace, D.; and Scholes
model:evidence from m the Australlian Stock Exxchange, Ausstralasian Acccounting Buusiness and Finance
F
Journal,, 1(4), 2007.

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ASX2000 Option Inndex. Using g single-parrameter estim mates of factors withinn the B & S model,
this papper utilises qualitative
q regression
r aand a maxim mum likelihood approacch. Results indicate
that the B & S moddel is statistiically signifficant at the 1% level an
nd it also prrovide evideence that
the use of implied volatility
v an
nd a jump-ddiffusion app proach, whiich increasees the tail prroperties
of the uunderlying lognormal distributionn, improves the statistical significcance of thee B & S
model.
Espen G Gaarder Hauug & Nassim Nicholass Taleb (200 08)7 in theirr paper Wh
Why We Hav ve Never
Used thhe Black-Sccholes-Mertton Option Pricing Fo ormula em mphasized oon the gap between
b
finance theory andd practicle. They
T furtheer narated th
hat Option hedging,
h priicing, and trrading is
neither philosophyy nor matheematics. It iis a rich craaft with traaders learninng from traaders (or
traders copying othher traders) and tricks ddeveloping under evolu ution pressuures, in a boottom-up
mannerr. This studdy is aimed at analyzzing the feeasibility of Black - Scholes Merton
differenntial equatioon model fo
or stock optiion pricing in Indian Context. Thee result of th his study
can be uused to predict the suitability of uusing Black k - Scholes Merton ddifferential equation
e
model tto predict sttock option prices in Inndian markeet. Further thet indipend
ndent t test has
h been
used to check wheether the meean differennce between n expected price as coomputed by Black -
Scholess Merton differential
d equation moodel and ctu ual price havve any signiificant diffeerence or
saying oof Espen Gaaarder Haug g & Nassim m Nicholas Taleb
T is corrrect.
Chaudh hury and Jason
J 96) examineed the behavior of Eu
(199 uropean opption price and the
Black-S Scholes moddel bias wh hen stock reeturns follow w a GARCH (1,1) proocess. The GARCH G
option pprice is not preference neutral andd depends ono the unit risk
r premium um (l) as weell as the
two GA ARCH (1,1)) process parameters ((a1 ,b1). Deeep-out-of the-money and short maturity m
options are an excception. The variance persistencee parameter, g = a1 + b1, has a material
bearingg on the maggnitude of th
he Black-Sccholes modeel bias. The risk
r preferennce parameeter, l, on
the otheer hand, determines thee so called leverage efffect and caan be imporrtant in deteermining
the direection of thee Black-Sch
holes model bias.
Heston and Nanddi (2000)8 in n their papeer developed d a closed-fform optionn valuation formula
for a spot asset whoose variance follows a GARCH(p, q) process that can bee correlated with the
returns of the spott asset. Thee single lagg version off this modeel contains Heston's sttochastic
volatilitty model asa a continu uous-time liimit. Empirrical analyssis on S&PP500 index options
shows tthat the out-of-sample valuation
v err
rrors from th
he single lag
g version off the GARCHH model
are subbstantially loower than the ad hoc Black-Sch holes modell that uses a separate implied
volatilitty for each option
o to fitt to the smirrk/smile in the
t implied volatilities .

7 Espenn Gaarder Haug

Ha & Nassiim Nicholas Taleb (2008)) in their pap per Why Wee Have Neverr Used
the Blacck-Scholes-MMerton Option n Pricing Foormula, can be
b downloadded from:
http://chhineseactuaryy.groupsite.ccom/uploads/f/files/x/000/0
00e/45c/Whyy_We_Have_N
_Never_Usedd_the_Bl
ack-Schooles-Merton__Option_Priicing_Formuula.pdf
8
Hestonn, SL; Hestonn, Steven L.; Nandi, S; N Nandi, Saikat(2000) A closed-form GA
ARCH optionn
valuatioon model, Revview of Financial Studiess, Fall2000, Vol. 13 Issuee 3

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Lehar, Scheicher and Schitteenkopf (20002)9 examin

ned the out-of-sample pperformance of two
commoon extensionns of the Black-Schol
B les framewo
ork, namelyy a GARCH H and a sttochastic
volatilitty option prricing modeel.
Christoffersen, Petter; Heston n, Steve; Jaacobs, Kris (2006)10 found
f that IIndex option prices
differ systematicaally from Black-Schholes pricees. Out-of-the-money put pricees (and
money call prices)
in-the-m p are relatively hhigh comparred to the Black-Schole
B es price. Motivated
M
by thesse empiricall facts, the authors deevelop a new w discrete-time dynam mic model of stock
returns with Inversse Gaussian innovationns. The model allows fo or conditionnal skewnesss as well
as condditional heteeroskedasticcity and a leeverage effeect. The papper presentss an analytic option
pricing formula consistent witth this stockk return dynnamic.
Barone--Adesi, Gioovanni; Eng gle, Robert FF.; Mancinni, Loriano. (200811 theeir work an nalyzes a
new meethod for pricing option ns based onn GARCH models
m with filtered hisstorical inno
ovations.
In an iincomplete market fraamework thhe authors allow for different ddistributionss of the
historiccal and the pricing
p returrn dynamicss enhancingg the model flexibility tto fit markeet option
prices. AAn extensivve empiricall analysis baased on S&P 500 indexx options shhows that thiis model
outperfoforms other competing GARCH prricing modeels and ad ho oc Black-Sccholes models.
Singh, Ahmad an nd Pachorii (2011) 12 The researcch work em mpirically iinvestigatess out of
sample forecastingg performan nce of clossed-form diiscrete timee Heston annd Nandi GARCH G
option pricing model
m with
h benchmaark Black--Scholes and a its veersion Practitioner
Black-SScholes moddel for priciing S&P CN NX Nifty 50 0 index optiion of Indiaa, relative to
o market
price ussing error metrics,
m moneyness-matturity wise. In I this reseaarch work, tthe authors first
f find
the paraameters of thhe models analytically,
a , and then ussed them to produce relliable predicctions of
the nexxt-day optiion prices.. The resuults show that Practitioner Blaack-Scholess model
outperfo
forms the othher two mod dels. It is noot only outp
performing butb also redu
ducing the prrice bias
betweenn model andd market greeatly, despitte the fact th hat executioon of GARC CH is very complex
c
as comppared to Praactitioner Bllack-Scholees and Black k-Scholes. The
T Practitiooner Black--Scholes
reducess price bias significantly, in 12 outt of 15 moneyness-matu urity groupss.
Rotkow wski, Aaroon M.(2011 1) 13 , in theeir research
h paper enttitled Estim
mating Stocck Price
les-Merton Model fou
Volatiliity in the Black-Schol
B und that Th
he BSM mo model is a common
c

9
Lehar,, Alfred; Sch
heicher, Marrtin; Schittennkopf, Christtian. (2002) GARCH vs. sstochastic vo olatility:
Option ppricing and risk
r managem ment, Journaal of Banking g & Finance, Mar2002, V Vol. 26 Issue 2/3,
p323, 233p,
10 Chriistoffersen, Peter;
P Heston n, Steve; Jaccobs, Kris. (2 2006), Option n valuation w with conditio
onal
skewnesss, Journal off Econometriics, Mar/Aprr2006, Vol. 131 Issue 1/2, p253-284,
11 Baroone-Adesi, Giovanni;
G Enggle, Robert F F.; Mancini, Loriano(200 08), A GARC CH Option Pricing
P
Model w with Filtered Historical Simulation.,
S R
Review of Fin nancial Stud dies, May20008, Vol. 21 Isssue 3,
p1223-11258,
12 Singgh, Vipul Kum mar; Ahmad d, Naseem; P Pachori, Push hkar(2011), Empirical
E annalysis of GAARCH
and Practitioner Blaack-Scholes Model
M for prricing S&P CNX C Nifty 50 index optionns of India., Decision
D
(0304-09941), Aug2011, Vol. 38 Isssue 2, p51-667,
13
Rotkoowski, Aaronn M.(2011), Estimating
E Scholes-Mertonn Model, Vallue
Stockk Price Volatilitty in the Black-S
Examineer, Nov/Dec22011, p13-19 9, 7p,

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approacch used by valuation analysts

a to ccompute thee fair markeet amount oof non-tradeed stock
options made by cllosely held businesses.
b This modell consists off 5 fundameental parts in
ncluding
option ttime to expiiration, risk-free interesst rate, and current pricce of the und
nderlying sto
ock.
Limitattions of Stu
udy:
Thoughh study is based upon the
t analysiss of real tim me data andd aim to prooduce most feasible
results for Indiann market siituatio. Stuudy is baseed upon ceertain assum mptions an
nd these
assumpption can be regarded ass the limitattion of study
y. These aree:
i.. Theree is no diffeerence betw
ween historiccal volatility
y and implieed volatility
y.
iii. Dailyy fluctuation
n of option prices betw
ween periodss have not taaken in the study.
iiii. Dividdend yield is
i annual divvidend yield
d and remaiin same for study perio
od.
ivv. Volaatility remain
n same for sstudy period
d.
vv. Rate of interest (repo
( rate) ddoes not change during
g the analyssis period.
Data A
Analysis Real
R Time
Data obbtained froom F&O seegment of NSE has been tested d for the ffeasibility study
s of
Black-SScholes-Merton Model in Indian ccontext. Forr the analysis purpose H Historical volatility
v
has beeen computedd by consid dering the sttock prices movement between thhe dates 1-JJul-2010
and 30--Jun-2011. For
F the com mputation off annual volaatility first daily
d return has been co
omputed
by usinng ln(St/St-11) then daily
y standard deviation has
h been con nverted in aannual volaatility by
using foollowing forrmula:
Annual Volatility ()
( = Daily *Days iin a Year
Annual dividend yield
y has beeen computeed by consid dering the total dividennds paid in the year
he market prrice of the stock on 31--Mar-2011.
2010-20011 and connsidering th

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Table 1. Differencee between an

a expectedd and actual price of a call
c option eexpiring in 7 days
DATA JP Assocciate RIL
L SBI HINDALC
CO INFY
Y
Underlyinng Price 67.00 7866.35 1,937.55 139.40 2,352
2.60
Exercise P
Price 70.00 7800.00 2,300.00 180.00 2,400
0.00
Consideraation Date 9/22/201
11 9/222/2011 9/22/2011 9/22/2011 9/22//2011
Expiry Daate 9/29/201
11 9/229/2011 9/29/2011 9/29/2011 9/29//2011
Historicall Volatility 43.56% 23..71% 31.45% 35.50% 23.34
4%
Risk Free Rate 8.30% 8.330% 8.30% 8.30% 8.30%
%
Dividend yield 0.86% 0.776% 1.08% 0.72% 1.85%
%
Time(Yeaars) 0.02 0.002 0.02 0.02 0.02
d1 -0.67230
07 0.33073922 -3.883767 -5.145161 -0.35
56009
N(d1) 0.2507 0.66207 0.0001 0.0000 0.360
09
d2 -0.7326 0.22746 -3.9273 -5.1943 -0.40
052
N(d2) 0.2319 0.66082 0.0000 0.0000 0.342
27
Expected Price 0.5871 14..4184 0.0010 0.0000 27.67
780
Actual Priice 0.9 18..9 0.75 0.1 25.7
Differencee in value 0.3129 4.44816 0.7490 0.1000 1.9780
% Differeence 34.76667
7 23..71217 99.86667 100 7.146
647012

Source: ccomputed on the

t basis of reealtime data obbtained from NSE
N Derivative segment.

Table NNo. 1 shows difference between ann expected and a actual prrice of a calll option exp piring in
7 days. Expected price has beeen computedd by using Using U the Bllack Schooles Merto on model
which iis based on 5 factor vizz. Spot pricce of stock, Exercise prrice of the ooption, Ann nual risk
free ratee of return, Time
T to exp
piry of the opption, Annu ual volatilityy of the stocck. Table shows that
in case of short perriod (7 dayss) there is si gnificant diifference beetween expeected and acctual call
option pprice. The difference
d iss m,aximum m in case of Hindalco
H caall option prrice where expected
e
price is absent due to zero valu ue of N(d1) and N(d2), while the co omperative difference is i less in
case of INFY Call option i.e. Rs. R 1.9780 (27.6780-25 5.7) 7.15% only .

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Table 22. Price diffe

ference betw
ween an exppected and actual
a price of a call opption expirin
ng in 15
days
DATA JP Associate
A RIL SBI HIN
NDALCO INFY
I
Underlyinng Price 68.3
35 825.40 1,826.75
5 145 .10 2,351.65
2
Exercise Price 70.0
00 780.00 2,300.00
0 180 .00 2,400.00
2
Considerration Date 9/14
4/2011 9/14/2011 9/14/201
11 9/144/2011 9/14/2011
9
Expiry D
Date 9/29
9/2011 9/29/2011 9/29/201
11 9/299/2011 9/29/2011
9
Historicaal Volatility 43.5
56% 23.71% 31.45% 35.550% 23.34%
2
Risk Freee Rate 8.30
0% 8.30% 8.30% 8.300% 8.30%
8
Dividendd yield 0.86
6% 0.76% 1.08% 0.722% 1.85%
Time(Yeears) 0.04
4 0.04 0.04 0.044 0.04
0
d1 -0.19134995 1.2655302 -3.53491
11 -2.9915668 -0.209978
-
Nd1 0.42
241 0.8972 0.0002 0.00018 0.4168
0
d2 -0.2797 1.2175 -3.5987 -2.99876 -0.2819
-
Nd2 0.38
899 0.8883 0.0002 0.00014 0.3890
0
Expectedd Price 1.78
807 49.7800 0.0058 0.00053 49.1178
4
Actual Prrice 2.05
5 56.15 2.55 0.255 52.5
5
Differencce in value 0.26
693 6.3700 2.5442 0.24447 3.3822
3
% Difference 13.13659 11.34461 99.77255
5 97.888 6.44228
6

Source:: computed on the basiss of realtim

me data obta
ained from NSE
N Derivaative segmen
nt.
Table 2 indicates thhat increasee in the timee to expiry brings
b positiive impact oon call optioon prices
of all seelected underlaying stoock. Due to increase in n time to exp piry call opption price has
h been
incresedd because of time valuee of option aand relative difference has
h been miinimized in terms of
differennce betweenn expected price and actual pricce. The diffference in tthe value has h been
highest in case of RIL
R call opttion price w with Rs. 6.377 While low west in HIND DALCO calll option
with .24447 as a perccentage diffference in Innfosys Call option is lowwest with 6 .44% and hiighest in
SBI call option price with 99.7 77%.

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Table 3. The price difference between

b an expected and actual prrice of a calll option exp
piring in
30 dayss
DATA JP Asso
ociate RIIL SBI HINDALC
CO INFY
Underlyinng Price 58.30 7555.05 1,938.60 144.10 2,29
96.25
Exercise Price 70.00 7880.00 2,300.00 180.00 2,40
00.00
Considerration Date 8/29/2011 8//29/2011 8/29/2011 8/29/2011 8/29
9/2011
Expiry D
Date 9/29/2011 9//29/2011 9/29/2011 9/29/2011 9/29
9/2011
Historicaal Volatility 43.56%
% 233.71% 31.45% 35.50% 23.3
34%
Risk Freee Rate 8.30% 8. 30% 8.30% 8.30% 8.30
0%
Dividendd yield 0.86% 0. 76% 1.08% 0.72% 1.85
5%
Time (Yeears) 0.08 0. 08 0.08 0.08 0.08
8
d1 -1.3274
45587 -00.343263 -1.752344 -2.036193 -0.322466
Nd1 0.0922 0. 3657 0.0399 0.0209 0.37
735
d2 -1.4544
4 -00.4124 -1.8440 -2.1397 -0.4259
Nd2 0.0729 0. 3400 0.0326 0.0162 0.33
351
Expectedd Price 0.3018 122.5778 2.7623 0.1109 57.8
8701
Actual Prrice 0.45 166 6.5 0.5 47.1
15
Differencce in value 0.1482 3. 4222 3.7377 0.3891 10.7
7201
% Difference 32.9333
33 211.38875 57.50308 77.82 22.7
73616119
Source:: computed on the basiss of realtim
me data obta
ained from NSE
N Derivaative segmen
nt.

Table 44. The price difference between

b an expected and actual prrice of a calll option exp
piring in
43 dayss
DATA JP Asso
ociate RIIL SBI HINDALC
CO INFY
Underlyinng Price 57.15 7559.15 2,196.95 144.35 2,39
99.30
Exercise Price 70.00 7880.00 2,300.00 180.00 2,40
00.00
Considerration Date 8/16/2011 8//16/2011 8/16/2011 8/16/2011 8/16
6/2011
Expiry D
Date 9/29/2011 9//29/2011 9/29/2011 9/29/2011 9/29
9/2011
Historicaal Volatility 43.56%
% 233.71% 31.45% 35.50% 23.3
34%
Risk Freee Rate 8.30% 8. 30% 8.30% 8.30% 8.30
0%
Dividendd yield 0.86% 0. 76% 1.08% 0.72% 1.85
5%
Time(Yeears) 0.12 0. 12 0.12 0.12 0.12
2
d1 -1.2060
0949 -00.177559 -0.285489 -1.654948 0.12
223442
Nd1 0.1139 0. 4295 0.3876 0.0490 0.54
487
d2 -1.3573 -00.2599 -0.3947 -1.7782 -0.0009
Nd2 0.0873 0. 3975 0.3465 0.0377 0.49
996
Expectedd Price 0.4493 188.8363 61.4032 0.3465 126..3427
Actual Prrice 0.7 222.6 55.05 0.7 81.2
25
Differencce in value 0.2507 3. 7637 6.3532 0.3535 45.0
0927
% Difference 35.8142
29 166.65354 11.54078 50.5 55.4
49870769

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Source:: computed on the basiss of realtim

me data obta
ained from NSE
N Derivaative segmen
nt.

Observvations
In the ccase of calll option wiith time to expiry of 7 days, the least diffeerence in prrice was
achieveed in Hindaalco Industtries limitedd which is Rs.0.1000 and follow wed by JaiiPrakash
Associaates with Rss.0.3129. Inn the case off call optionn with time to expiry oof 15 days, the
t least
differennce in pricee was achiieved in Hiindalco Ind dustries lim
mited whichh is Rs.0.24 447 and
followeed by JaiPraakash Asso ociates withh Rs.0.2693. In the casse of call ooption with time to
expiry oof 30 days, the least difference in price was achieved
a in JaiPrakash associates which
w is
Rs.0.14482 and followed by Hindalco
H Inndustries limmited with Rs.0.3891..In the casee of call
option wwith time too expiry of 43
4 days, thee least diffeerence in priice was achhieved in JaiiPrakash
associattes which iss Rs.0.2507 and followwed by Hind dalco Industrries limitedd with Rs.0.33535
Table 5. The price difference between
b an expected an
nd actual priice of a put ooption expiring in 7
days.
DATA JP Assocciate RIL
L SBI
S HINDALCO
O INFY
Underlyiing Price 67.00 7866.35 1,937.55
1 139.40 2,352.6
60
Exercise Price 70.00 7800.00 2,100.00
2 150.00 2,400.0
00
Considerration Date 9/22/201
11 9/2 2/2011 9/22/2011
9 9/22/2011 9/22/20
011
Expiry D
Date 9/29/201
11 9/2 9/2011 9/29/2011
9 9/29/2011 9/29/20
011
Historicaal Volatility 43.56% 23.771% 31.45%
3 35.50% 23.34%
%
Risk Free Rate 8.30% 8.300% 8.30%
8 8.30% 8.30%
Dividendd yield 0.86% 0.7 6% 1.08%
1 0.72% 1.85%
Time(Yeears) 0.02 0.022 0.02
0 0.02 0.02
d1 -0.67230
07 0.30073922 -1.795032
- -1.436585 -0.3560
009
Nd1 0.2507 0.62207 0.0363
0 0.0754 0.3609
9
d2 -0.7326 0.27746 -1.8386
- -1.4857 -0.4052
2
Nd2 0.2319 0.60082 0.0330
0 0.0687 0.3427
7
Expectedd Price 3.4868 6.94424 160.7120
1 10.6079 72.095
53
Actual P
Price 3.9 14.445 165
1 11.5 78.5
Differencce in value 0.4132 7.50076 4.2880
4 0.8921 6.4047
7
% Differrence 10.59487 51.995571 2.598788
2 7.757391 8.1588
853503

Source:: computed on the basiss of realtim

me data obta
ained from NSE
N Derivaative segmen
nt.

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Table 66. The price difference between

b ann expected and
a actual price of a puut option exp
piring in
15 dayss
DATA JP Associate RIL
L SBI
S HINDALCO
O INFY
Y
Underlyingg Price 68.35 8255.40 1,826.75
1 145.10 VALU
UE
Exercise P
Price 70.00 7800.00 2,100.00
2 150.00 2,351.65
Considerattion Date 9/14/2011 9/144/2011 9/14/2011
9 9/14/2011 2,400
0.00
Expiry Daate 9/29/2011 9/299/2011 9/29/2011
9 9/29/2011 9/14/2
2011
Historical Volatility 43.56% 23.771% 31.45%
3 35.50% 9/29/2
2011
Risk Free Rate 8.30% 8.300% 8.30%
8 8.30% 23.34
4%
Dividend yyield 0.86% 0.766% 1.08%
1 0.72% 8.30%
%
Time (Yeaars) 0.04 0.044 0.04
0 0.04 1.85%
%
d1 -0.191349
995 1.26655302 -2.108033
- -0.382229 0.04
Nd1 0.4241 0.89972 0.0175
0 0.3511 -0.209
9978
d2 -0.2797 1.21175 -2.1718
- -0.4542 0.416
68
Nd2 0.3899 0.88883 0.0149
0 0.3248 -0.2819
Expected P
Price 3.2165 1.98818 267.6310
2 6.8076 0.389
90
Actual Pricce 3.85 9.755 267
2 7.85 91.0826
Differencee in value 0.6335 7.76682 0.6310
0 1.0424 103.35
% Differennce 16.45455
5 79.667385 0.23633
0 13.27898 113.4
4684341
Source:: computed on the basiss of realtim
me data obta
ained from NSE
N Derivaative segmen
nt.

Table 77. The price difference between

b ann expected and
a actual price of a puut option exp
piring in
30 dayss
DATA JP Associate RIL
L SBI
S HINDALCO
O INFY
Y
Underlyingg Price 58.30 7555.05 1,938.60
1 144.10 2,296
6.25
Exercise P
Price 70.00 7800.00 2,100.00
2 150.00 2,400
0.00
Considerattion Date 8/29/2011 8/299/2011 8/29/2011
8 8/29/2011 8/29/2
2011
Expiry Datte 9/29/2011 9/299/2011 9/29/2011
9 9/29/2011 9/29/2
2011
Historical Volatility 43.56% 23.771% 31.45%
3 35.50% 23.34
4%
Risk Free R
Rate 8.30% 8.300% 8.30%
8 8.30% 8.30%
%
Dividend yyield 0.86% 0.766% 1.08%
1 0.72% 1.85%
%
Time (Yeaars) 0.08 0.088 0.08
0 0.08 0.08
d1 -1.32745587 -0.3343263 -0.759796 -0.273911 -0.322
2466
Nd1 0.0922 0.36657 0.2237
0 0.3921 0.3735
d2 -1.4544 -0.44124 -0.8515 -0.3774 -0.425
59
Nd2 0.0729 0.34400 0.1973
0 0.3529 0.3351
Expected P
Price 11.5526 32.55359 170.3353
1 8.8275 148.3663
Actual Pricce 14.35 38.775 178.4
1 11.15 140
Differencee in value 2.7974 6.2 141 8.0647
8 2.3225 8.366
63
% Differennce 19.49408
8 16.003639 4.520572
4 20.8296 5.975928571

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Source:: computed on the basiss of realtim

me data obta
ained from NSE
N Derivaative segmen
nt.

Table 88. The price difference between

b ann expected and
a actual price of a puut option exp
piring in
43 dayss.
DATA JP Asso
ociate R
RIL SBI HINDAL
LCO IN
NFY
Underlyinng Price 57.15 7559.15 2,196.95 144.35 2,3
399.30
Exercise Price 70.00 7880.00 2,100.00 150.00 2,4
400.00
Considerration Date 8/16/20
011 8//16/2011 8/16/2011 8/16/201 1 8/1
16/2011
Expiry D
Date 9/29/20
011 9//29/2011 9/29/2011 9/29/201 1 9/2
29/2011
Historicaal Volatility 43.56%
% 233.71% 31.45% 35.50% 23.34%
Risk Freee Rate 8.30% 8..30% 8.30% 8.30% 8.3
30%
Dividendd yield 0.86% 0..76% 1.08% 0.72% 1.8
85%
Time (Yeears) 0.12 0..12 0.12 0.12 0.1
12
d1 -1.2060
0949 -00.177559 0.5476283 -0.17573 8 0.1
1223442
Nd1 0.1152 0..4295 0.7080 0.4302 0.5
5487
d2 -1.3505
5 -00.2599 0.4384 -0.2990 -0.0009
Nd2 0.0884 0..3975 0.6695 0.3825 0.4
4996
Expectedd Price 12.5859
9 322.6161 46.5982 9.5349 108.4941
Actual Prrice 11.15 388 55 12.4 79
Differencce in value 0.2439 5..3839 8.4018 2.8651 29.4941
% Difference 2.18744
44 144.16816 15.276 23.105655 37.3343038

Source:: computed on the basiss of realtim

me data obta
ained from NSE
N Derivaative segmen
nt.

Observvations
In the caase of put opption with time to expirry of 7 dayss, the least difference inn price was achieved
a
in JaiPrrakash assocciates which h is Rs.0.41132 and folllowed by Hiindalco Indu dustries limiited with
Rs.0.89921. In the case
c of put option
o with ttime to expiry of 15 daays, the leastt differencee in price
was achhieved in State Bank off India whicch is Rs.0.63 310 and folllowed by JaaiPrakash asssociates
with Rss.0.6335 In the case of put option w with time too expiry of 30 days, thee least diffeerence in
price wwas achieveed in Hindalco Industtries limited which iss Rs.2.32255 and follo owed by
JaiPrakkash Associaates with Rss.2.7974. Inn the case off put option with time too expiry of 43 days,
the leasst difference in price wasw achieveed in JaiPraakash assocciates whichh is Rs.0.2438 and
followeed by Hindaalco Industrries limited with Rs.2.8 8651. So it can be seenn that mosttly in all
cases JaaiPrakash Associates
A an
nd Hindalcoo Industries limited has occupied thhe first two ranks in
providinng least diff
fference fromm the actuall price.
It is alsso observedd that JaiPraakash associiates has go ot a historiccal annual vvolatility off 43.56%
and hinndalco Indusstries limited d has got a hhistorical an
nnual volatiility of 35.5 % which arre higher
than thee historical annual volaatility of othher three commpanies.

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It can allso be seen that Infosyss Limited w

which has hiistorical volatility of 233.34% is thee least of
all com
mpanies in caase of historical annuall volatility and
a it has shown the hi highest diffeerence in
prices m
mostly whenn compared to other com mpanies. Th he companiees which haave higher historical
h
volatilitty, the Blackk-Scholes-M
Merton moddel can prov vide least diifference beetween the expected
e
and actuual value off call and pu
ut options oof that stock
k.
Market capitalizatiion of Infossys Limitedd is Rs. 1,4 46,532.7 croores , Markket capitalizzation of
State B
Bank of Inddia is Rs. 1,11,013.7 ccrores, Marrket capitalization of R Reliance Inndustries
limited is Rs.2,688,533.75 cro ores, Markeet capitalizzation of Hindalco
H Inddustries Lim
mited is
Rs.24,7725.59 crorees and Markket capitalizzation of JaiiPrakash asssociates is R
Rs.15586.76 6 crores.
It can bbe seen thaat the averaage markett capitalizattion of Hin ndalco Induustries Limiited and
JaiPrakkash associaates is neaarly 8.7 timmes lower than the marketm capiitalization of
o other
compannies. So Bllack-Scholees-Merton m model seem ms to prov vide least ddifference in price
predictiion for the companies
c with
w lower m market capiitalization.

Table 99. Table showing the av

verage differrence in opttion prices of
o five stockk options
Days to eexpiry Caall option Put opttion
aveerage differen
nce in price % Avg difff. averagee difference inn price % Avg diff.
7 days 1.55243 53.21 3.90112
2 16.21
1
15 days 2.556208 45.72 4.4685 44.62
4
30 days 3.668346 42.48 5.553 13.37
1
43 days 11..16276 34.00 9.27776 18.41
1

Observvations
From thhe above annalysis it is found
f that tthe expectedd values varry significanntly from thhe actual
values. In the Tablee 9, it can be found thatt the percen ntage averagge differencee in prices keeps
k on
decreassing as the number of days to exxpiry increases. This sh hows that tthe accuracy of the
Black-SScholes-Merton model in computaation of calll option pricces increasees as the nu umber of
days to expiry increeases. It cann also be fouund that thee average diffference in rrupee pricess for call
options are mostlyy lower than n the averaage differen nce in rupeee prices forr put option ns, while
averagee percentage difference is not sim milar in alll four casess as call opption showss higher
percentage differennces compaared to put option price. This show ws that the prediction level of
Black-SScholes-Merton model for a call opption is high her than thaat of the putt option. Regression
analysiss of differennce in follow
wing sectionn makes ou ur inference more valid..

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Regresssion Analyssis: Regression Value oof Differencce in Call Op

ption pricess
Model R R Square A
Adjusted R Sq
quare Sttd. Error of thee Estimate
1 .9905(a) .819 . 729 2.27955

a Predicctors: (Consstant), Dayss

OVA(b)
ANO
Sum
m of
Moddel Squaares df Mean
n Square F Siig.
1 Regressiion 47.0
059 1 47.059 9.056 .0095(a)
Residuaal 10.3
393 2 5.196
6
Total 57.4
452 3

a Predicctors: (Consstant), Dayss

b Depenndent Variaable: ECPRIICEDIF
Coefficcients(a)
Standardized
S
Model Unstandaardized Coeffi
ficients Coefficients
C t Sig.
B Std. Errror Beta
B B Std. Errror
1 (Constant) -1.151 2.263 -.508 .662
Days .248 .082 .905 3.009 .095

a Depenndent Variaable: ECPRIICEDIF

(iii) Regression Value oof Differencce in Put Option pricees:

Model R R Square Adjusted R Square Std. Error off the Estimatee

1 .939(a) .881 .822 1.01955

a Predicctors: (Consstant), Dayss

ANO
OVA(b)
Model Sum of Squares ddf Mean Squaare F Sig.
1 Regression 15.455 1 15.455 14.8868 .061(a)
Residual 2.079 2 1.039
Total 17.534 3

a Predicctors: (Consstant), Dayss

b Depenndent Variaable: EPPRIICEDIF

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C oefficients((a)
Staandardized
Model Unstandarrdized Coefficcients Coefficients t Sig.
B Std. Error Betta B Std. Error
1 (Constant) 2.428 1.012 2.399 .139
9
Days .142 .037 .939 3.856 .061
1

a Depenndent Variaable: EPPRIICEDIF

Model Sum
mmary: Regression Vaalue of % Difference
D in Call Opption prices:

Moddel R R Squaare Adjusted R Square Std. Erroor of the Estim

mate
1 .973(a) .946 .920 2.25733

a Predicctors: (Consstant), Dayss

Model Sum
mmary: Reegression V
Value of % Difference in Put Opttion prices::

Model R R Squaare Adjussted R Squaree Std. Error of the E

Estimate
1 .323(a) .104 -.3444 16.7
76026

a Predicctors: (Consstant), Dayss

Regresssion analysiis is a metho od to deal w
with the relattionship betw ween indeppendent variable and
dependeent variablee, in this study
s days to expiry i.e. 7, 15, 30 and 43 are consid dered as
indepenndent variabble while caall and put ooption pricess are depend dent over thhe change inn time to
expiry. On the basiis of outcom me of regresssion analyssis we can say s that tim me to expiry and call
option pprices havee positive reelationship as it has been
b one off the basic pprinciple off B-S-M
model. Here R valuue is .905 and R Squarre .819 in caase of Europ pean Call O Option price average
differennce that sayys that if tim
me to expirry decreasess call premium decreaases and vicce versa.
Similar relationshipp has been observed
o in case of put option behaaviour withh R value .93 39 and R
Square value .881 which
w indiccate close reelation ship between thee put optionn premium and a days
to expirry. Based onn the regresssion value w we can say that
t put optiion price rellationship withw time
to expirry is more sttrong than the
t call opti on price. Th his relationsship is also explain by theta
t ()
Greek uunder the B-S-M
B modeel. Our studdy based on n regression n analysis prrove the vaalidity of
B-S-M model, thouugh when it comes to peercentage difference
d in
n the put opttion prices analaysis
a
says thaat it is not necessary that
t alwayss reduction in time willl reduce puut option price and
increasee in time to expiry will increase puut option pricce as the Ad djusted R Sqquare value is -.344.
So far aanova is conncern the tab
ble value foor 1 degree of freedom for numeraator and 2 degree
d of
freedomm of denom minator for 5 % level off significancce is 18.5 and
a computeed value is 9.05 for
call opttion price annd 14.868 for
fo put optioon price, theerefore null hypothesis is accepted
d in both
the casees.

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Paired Samples Statistics

Meean N Stdd. Deviation Std

d. Error Meann
Pair 1 CPD 43.8525 4 7.995835 3.9
97917
PPD 23.1525 4 14..45960 7.2
22980

Paired Saamples Corrrelations

N Correlattion Sig.
S
Pair 1 CPD & PP
PD 4 .102 .8
898

Paireed Sampless Test

Siig.
Paireed Differencess df (2
2-tailed)
95% Co
onfidence Interval of the Std.
Differen
nce Erro
Std. r
Std. Std. Errror Deviattio Mea
Meann Deviation Mean Upper Lower t n n
Pair C
CPD -
20.7 15.77646 7.88823 -4.40387 45.80
0387 22.624 3 .0
079
1 PP
PD

CPD: C
Call price Avverage % Difference
D w
with Actual Price
P
PPD: Puut price Average % Difference wiith Actual Price
P
Table vvalue at 5%% significancce level forr 3DF is 3.1 182 while computed
c t value is 2.624 that
indicatees that B-S--M model iss identical ffor both calll and put op
ption pricinng henceforrth H3 is
accepteed.
Hypothhesis can be concluded in the follow
wing manneer:
H1: Theere is no siggnificant diffference bettween the exxpected optiions price ccomputed by
y B-S-M
Model by taking historical
h voolatrility annd actual prrice determined by maarket forcess. Result
Accepted.
H2: There is no im mpact of lenngth of tim
me to expiry
y on the diff
fference betw
tween expeccted and
actual ooptions pricce. Rejected/ Not Acccepted because for bo oth call andd put there is stong
corelatiion betweenn time to exp
piry and priice.
H3: Blaack Schole Merton
M mod
del gives iddentical resu
ult for both call option price as weell as put
option pprice. Accep
pted
Recommendation
ns for the Application
A of Model:
Traders neeed to be cauutious whilee using Black-Schole-MMerton modeel for prediccting the
price of putt option as the
t averge vvariation in the prices are
a higher inn case of pu
ut option
compared tot call optioon.

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2012, Vol. 4, No. 2

Traders shoould avoid using

u Blackk-Scholes-MMerton modeel when dayys to expiry are
nearer as thhe relative / percentage difference in prices inccreases highhly with thee decrese
in number of o days to expiry.
e Usinng Black-Scholes-Merto on model wwhen days to o expiry
are less willl lead to hig
gh percentag
age differencce in prices between thhe expected and
actual valuees of call annd put optioons
Traders shoould use Blaack-Scholess-Merton mo
odel when days
d to expirry are moree, as they
seem to proovide better results.
Conclu
usion
On the bbasis of the real time daata collectedd from the derivative
d seegment of N
NSE, the calll and put
prices oof stock optiions have beeen computeed and com mpared with the t actual caall and put prices
p of
stock ooptions. Thee differencee between tthe expecteed and actual values w were found and the
results of Black-Scholes-Merrton model have certaiin relationship with thhe historical annual
volatilitty and the market
m capitalization off the stock. It
I is also fou
und that the difference in
i prices
increasees as the number
n of days to exxpiry decreaases and it also has bbeen observ ved that
Black-S Scholes-Merton model provides bbetter resultts for call optionso wheen compared to put
options.
From thhe researchh it is found d that the fe
feasibility of
o Black-Sch holes-Mertoon model forf stock
options trading in NSE India I markket is verry low. As A the priices prediccted by
Black-SScholes-Merton model seems to vaary highly frrom the actu ual values. A
At present using this
model w would lead the
t possibillity of price differenciaation in Indian derivativve market ass market
is drivenn by large number
n of macro
m econoomic factorss as well as the emotionns of the traders and
investorrs. Thereforre there is need
n to brinng more refform in this model to m make it feassible for
Indian sstock optionn products.
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