An examination of kurtosis of lognormality in the Black-Scholes option pricing formula in the South African warrants market
- Resource Type
- Authors
- Chen, Hung-Hsiang
- Source
- Subject
- Economics
InformationSystems_INFORMATIONSTORAGEANDRETRIEVAL
ComputingMethodologies_DOCUMENTANDTEXTPROCESSING
GeneralLiterature_REFERENCE(e.g.,dictionaries,encyclopedias,glossaries)
- Language
- English
Includes bibliographical references.
The assumption of constant asset price volatility of classical Black-Scholes model hasbeen challenged continuously. The symmetrical distribution emphasises a lognormalized asset. This paper aims to investigate the volatility distribution (i.e. kurtosis) of the South African warrants market at Johannesburg Stock Exchange based on a comparison of option implied distributions of the terminal price of the TOP European Call option with lognormal distribution. The result indicates that the constant volatility of Black-Scholes model does not show in the selected warrant market.