Analytical Method for Estimation of Black-Scholes Equation of Option Pricing

Сажетак

The attainment of any investments hinge on the value of options which impels the entire financial authority of every trader and Black-Scholes equation are well known prevailing mathematical instrument used for the estimations of stock option prices. Therefore, this paper, considered the concept of option pricing by means of Black-Scholes equation which governs the growth of option price with esteem to the expiration and cost of the fundamental asset. These equations were modified to assume a probability which measures risk-free interest rate of the underlying asset for Call and Put options. The Black-Scholes exact values and Modified Black-Scholes values were obtained and compared to close form prices. Finally, graphical solutions and interpretations of relevant parameters were well discussed.