Application of the Black-Scholes Model on Analyzing the Option Pricing for Stock Price of JPMorgan Chase & Co.

Abstract

Stocks are utilized extensively in the financial markets and provide a good option for businesses looking to raise funds. Additionally, investors usually choose stocks as their preferred investment vehicle due to their potential for large returns. When it comes to stock option pricing, the Black-Scholes model is an effective instrument. The pricing of complex financial instruments saw a significant advancement in the early 1970s when Myron Scholes, Robert Merton, and Fisher Black used current stock prices, expected dividends, the option's strike price, expected interest rates, time to expiration, and expected volatility to determine the theoretical value of an option contract. The objective of this research is to analyse the pricing of stock options for JPMorgan Chase & Co. using the Black-Scholes model. The Black-Scholes model is employed to achieve this, incorporating variables such as the underlying stock price, expected dividends, strike price, interest rates, time to expiration, and volatility to determine the theoretical values of call and put options. The underlying stock price of JPMorgan Chase & Co. is 198.77, the call option price is 2.774935402, and the put option price is 0.183125114, according to research findings. This suggests that the call option price is higher than the put option price at this strike price