The Black-Scholes option pricing formula requires the underlying price to stay positive. Then, Black-Scholes cannot be used
Fantastic news! We've Found the answer you've been seeking!
Question:
How did the exchange solve the option pricing problem allowing negative underlying price? (Hint: exchange employed Bachelier model. You will be awarded a full mark by copying and paste the information from the website and provide in-text citations with references. We will get back to this piece of knowledge after we learn option pricing in week 7 and week 8.)
Related Book For
Financial Reporting And Analysis
ISBN: 9781260247848
8th Edition
Authors: Lawrence Revsine, Daniel Collins, Bruce Johnson, Fred Mittelstaedt, Leonard Soffer
Posted Date: