New option pricing model improves accuracy for Indian stock market.
The goal of the study was to compare different models for pricing options in the Indian stock market. The researchers looked at three models, including the classical Black-Scholes model, to see which one best predicted option prices. They selected 22 stocks from the top 5 sectors of the Indian market and compared the theoretical option prices from each model to the actual market prices. The results showed that a modified Black-Scholes model with a different distribution had the lowest errors in predicting option prices.