كنفرانس بين المللی مهندسی صنايع و سيستم ها

صفحه اصلی / یازدهمین كنفرانس بين المللی مهندسی صنايع و سيستم ها

Determinants of Option Pricing Errors: Evidence from Tehran Derivatives Market

نویسندگان :

Danial Mohammadi¹ Emran Mohammadi² Zhina Nanvay Savojbolaghi³

1- Iran University of Science and Technology 2- Iran University of Science and Technology 3- Research Sciences Unit Islamic Azad University

کلمات کلیدی :

Option contracts،Volatility،Pricing Error،Black-Scholes-Merton Model،Tehran Securities Exchange،Expiration Effect

چکیده :

In recent years, the growing volume of option contract trading has underscored the importance of accurate and reliable valuation of these financial instruments. Despite the widespread adoption of the Black-Scholes-Merton (BSM) model for pricing options, empirical evidence suggests that this model is subject to pricing errors. The present study investigates the influence of three key variables—historical volatility, the moneyness status of the underlying asset, and time to maturity—on the pricing error of the BSM model. Empirical analysis reveals systematic discrepancies between the theoretical prices produced by the BSM model and observed market prices. Using panel data regression and the Stata statistical software, the study estimates the effect of the aforementioned variables on model error. The results indicate a positive and statistically significant relationship between each variable and the magnitude of the pricing error. The dataset consists of options contracts traded between 2019 and 2023 on the Tehran Stock Exchange. Additionally, the Root Mean Squared Error (RMSE) was calculated, showing that the BSM model's estimated prices deviated from actual market prices by approximately 55%, highlighting the need for improved pricing accuracy in emerging markets.