Title
An empirical investigation of the Black-Scholes model: evidence from the Australian stock exchange
Document Type
Journal Article
RIS ID
22439
Citation
McKenzie, Scott; Gerace, Dionigi; and Subedar, Zaffar, 2007, An empirical investigation of the Black-Scholes model: evidence from the Australian stock exchange, Australasian Accounting Business and Finance Journal, 1(4), 71-82.
http://ro.uow.edu.au/era/484
Abstract
This paper evaluates the probability of an exchange traded European call option being exercised on the ASX200 Options Index. Using single-parameter estimates of factors within the Black-Scholes model, this paper utilises qualitative regression and a maximum likelihood approach. Results indicate that the Black-Scholes model is statistically significant at the 1% level. The results also provide evidence that the use of implied volatility and a jump-diffusion approach, which increases the tail properties of the underlying lognormal distribution, improves the statistical significance of the Black-Scholes model.