Submit your papersSubmit Now
For Enquiries: [email protected]
IIARD LogoIIARD

Pricing European Options by Analytical Methods with Applications in Fidelity and Access Banks Share Prices.

Amadi, IU, Obeten, BO, Jaja, J and Edeh Onyemaechipeter Chibueze

Abstract

This paper considered the framework of Black-Scholes model of European options on share price of Fidelity, Access and their future merged banks which gave closed form prices of Call and Put option prices with variations of maturity dates, affecting real life changes for capital markets. More so, the share price of the independent banks was used to form a system of linear equations; which gave three different solutions according to the banks under considerations whose solutions represents different outcomes for share prices to analyze and predict for the purpose of investment plans for capital markets by means of analytical method. Finally, we state and prove a proposition on solution of system of linear equations to show that our share price follows exponential series over time and obey some physical laws arising from financial markets. This paper offered here has profound inference for future studies of option prices and may one day help solve the problems of option traders and society at large.

Keywords

European optionsShare pricesStochastic AnalysisFidelity and Access Banks.

References

Amadi, I. U., Nwaigwe, E. and Azor P. A. (2020). Mathematical Analysis of Black-Scholes Partial Differential Equation on Stock prices. African Journal of Mathematics and Statistics studies, 3(4), 1-11. Amadi, I.U., Nmerukini, A, Ogbogolgbo,P.C., Aboko, S.I and Udoye, A.(2024). The Analysis of Black-Scholes of Option pricing with Time-Varying parameters on Share prices for Capital Market. 18(3),673-678. Applied Mathematics and Information Sciences an International Journal Babasola, O. L., Irakoze, I. and Onoja, A. A. (2008). Valuation of European options within the Black-Scholes framework using the Hermite Polynomial. Journal of scientific and Engineering Research, 5(1), 213-221. Black, F. and Scholes, M. (1973). The pricing of options and corporate liabilities. The journal of political Economy, 81,637-654. Fadugba, S. E., Adeniji, A. A., Kekana, M. C., Okunlola, J. T., & Faweya, O. (2023). Analytic Solution of Black-Scholes-Merton European Power Put Option Model on Dividend Yield with Modified-Log-Power Payoff Function. International Journal of Analysis and Applications, 21, 29-29. Fadugba, S.E. and Nwozo, C.R. (2013). Crank-Nicolson Finite Difference Method for Valuation of Options. The pacific Journal of Science and Technology, 14(2), 15-26. Fadugba, S.E., Chukwuma, N. and Teniola, B. (2012).The Comparative study of Finite Difference Method and Monte Carlo Method for pricing European Option. Mathematical Theory and Modelling, 2(2), 24-37. Hull, J. C. (2012). Option, Futures and other Derivatives (eighth Edition). Prentice Hall, Boston Columbus Indianapolis New York San Francisco. Hull, J.C. (2003). Options, Futures and other Derivatives, (5 Edition). Prentice Hall International, London. Nwobi, F.N., Annorzie, M.N. and Amadi, I.U. (2019). Crank-Nicolson finite difference method in valuation of options. Communications in Mathematical Finance, 8(1), 93-122. Osu, B.O. (2010). A Stochastic Model of the Variation of the Capital Market Price. International journal of of Trade,Economics and Finance,1(3), 297-302. Osu, B.O. and Okoroafor, A.C.(2007).On the measurement of random behavior of stock price changes. Journal of mathematical science Dattapukur,18(2),131-141. Osu, B.O., Emenyonu, S.C ., Ogbogbo, C.P. and Olunkwa, C.(2019). Markov Models on Share Price Movements in Nigeria Stock Market Capitalization, Applied Mathematics and Information Sciences an International Journal,N0 2,1-9. Rodrigo, M. R., and R. S. Mamon (2006). An alternative approach to solving the Black Scholes equation with time-varying parameters. Applied Math. Lett., 19: 398-402. DO1:10.1016/j.aml.2005.06.012. Shin, B. and H. Kim, (2016). The solution of Black-Scholes terminal value problem by means of Laplace transform. Global Journal Pure Applied Mathematics, 12: 4153 – 4158.

More Articles from IIARD INTERNATIONAL JOURNAL OF BANKING AND FINANCE RESEARCH

Institutional Performance and the Mobilisation of Capital Inflows in Ecowas Countries

Author: Ekere, Edobot, Chukwu, Sancho Nwobuisi , Amadi, Sonny Nwonodi , Ewubare, Dennis Brown

A Conceptual Model for Revenue Diversification and Return on Equity Optimization in Banking

Author: Ifeoma Okoli, Omotayo Pedro, Ann Kinyanjui, Kofi Okyere Mensah,, Priscilla, Agboada

Public Infrastructure Spending and Economic Growth in Nigeria: Evidence from a Disaggregated Expenditure

Author: Biira, Samuel, Amadi, Chukuemeka Robert, Nwikina, Christian Gbarawae and, Onyema, Joseph Iroka