erc/metu
INTERNATIONAL CONFERENCE IN ECONOMICS  IV
September 13-16, 2000, Ankara

Stock Options Pricing Models: An Empirical Study on Turkish Stock Market

Güler Aras (Yıldız Technical University)
Burak Salı (Ford Otosan)

Abstract  

This paper aims to examine the principles of options pricing models and its possible application in Turkish Stock Market. After reviewing the related models, assumed option premiums of the three stocks with high trading volume in Istanbul Stock Exchange have been priced in the framework of Black-Scholes and Binomial option pricing models. Historical data of the stocks have been used to calculate(measure) the volatility, for one mounth and three mounth period as the most significant variable in determination of the option premiums. According to the simulation study, we show that option premiums calculated by binomial model is higher than those calculated by Black- Scholes Model. On the other hand, it is inferred from the investors point of view that the profit/lose levels of the options buyers or sellers change in the expiration date of the option contract. In addition, comparing the historical and real volatilites we find that one-month volatility gives more accurate results than three–month volatility.

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