Purchase option contracts are priced according to the Black and Scholes model: An applied study on the Paris Stock Exchange

Abstract

This study seeks to shed light on the model of Black -Scholes and his role in pricing the contracts of purchase option in order to evaluate and determine the reward which is obtained by the counterparty, First, the study begins with theoretical side of contracts option since it considered the most important types of derivatives, and it gives the investor an important opportunity to reduce the risks, that may happen, by transferring to third parties. In addition to the study of the theoretical side, the practical side of study concerned with the analyzing of hedge results in a sample made up of six organizers companies to the CAC40 index, listed on the Paris Stock Exchange (La bourse de Paris), Its known and it is traded on the Paris stock exchange according to the case of OTM & ITM, the actual data was used to the stock prices average. That is in order to prove that the model of Black Scholes is very precise in the options of pricing where the execution price equals or very close to the stock price, especially when the option of two months is risen. The purpose here is not to study the process of entering the Paris Stock Exchange, but the purpose is to highlight the latest statistical and mathematical techniques in the field of financial engineering, as the Paris Stock Exchange is one of developed markets.