Article

An empirical investigation of the Black-Scholes model: evidence from the Australian Stock Exchange

Authors: Scott McKenzie (University of Wollongong, Australia) , Dionigi Gerace (University of Wollongong, Australia) , Zaffar Subedar (University of Wollongong, Australia)

  • An empirical investigation of the Black-Scholes model: evidence from the Australian Stock Exchange

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    An empirical investigation of the Black-Scholes model: evidence from the Australian Stock Exchange

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Abstract

This paper evaluates the probability of an exchange traded European call option being exercised on the ASX200 Options Index. Using single-parameter estimates of factors within the Black-Scholes model, this paper utilises qualitative regression and a maximum likelihood approach. Results indicate that the Black-Scholes model is statistically significant at the 1% level. The results also provide evidence that the use of implied volatility and a jump-diffusion approach, which increases the tail properties of the underlying lognormal distribution, improves the statistical significance of the Black-Scholes model.

Keywords: Black-Scholes model, probability, ASX200 Options Index

How to Cite:

McKenzie, S., Gerace, D. & Subedar, Z., (2007) “An empirical investigation of the Black-Scholes model: evidence from the Australian Stock Exchange”, Australasian Accounting, Business and Finance Journal 1(4), 71-82. doi: https://doi.org/10.14453/aabfj.v1i4.5

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Published on
31 Dec 2007
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