In this paper, Black Scholes’s pricing model was developed to study American option on future contracts of Brent oil. The practical tests of the model show that market priced option contracts as future contracts less than what model did, which mostly represent option contracts with price rather than without price. Moreover, it suggests call option rather than put option. Using t hypothesis test...

In this paper, the pricing of a European call option on the underlying asset is performed by using a Monte Carlo method, one of the powerful simulation methods, where the price development of the asset is simulated and value of the claim is computed in terms of an expected value. The proposed approach, applied in Monte Carlo simulation, is based on the Black-Scholes equation which generally def...

financial derivatives are new instruments through which hedging, investment and arbitrage are done in a modern economy. although the word 'derivative'primarily reminds us of options and futures, the major focus of the equity derivatives industry worldwide is on index derivatives. launching index options and index futures in tehran stock exchange, not only increases financial market de...

We explicitly solve an optimal stopping problem related to the exercise of a perpetual American call option when the option holder cannot trade the underlying asset. We prove the verification theorem for the solution proposed. We derive the moment generating function of the optimal exercise time and also the elasticity of the option value with respect to stock price. The class of admissible uti...

The role of ordinary options in facilitating the completion of securities markets is examined in the context of a model of contingent claims sufficiently general to accommodate the continuous distributions of asset pricing theory and option pricing theory. In this context, it is shown that call options written on a single security approximately span all contingent claims written on this securit...

Along with the well-known “call-put parity” relation, that makes it possible to express the rational price of a put option in terms of the rational price of a call option, we introduce a “call-put duality” relation. This new concept offers a simple explanation of the relationship between the rational price of a put option and a call option, not only for options of the European type, but also fo...