Case Study Of Option Pricing Strategy Using Black-Scholes Model
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1.1 INTRODUCTION ABOUT INTERNSHIP Internship or Project report is an integrated part of Master of Business Administration curriculum under the guidance of VTU. Internship Bridges gap between theoretical to application through a series of intervention to gain experience platform towards organizational behaviour and gives the exposure of industrial experience. It is 12 weeks program to serve twin objectives of providing / learning the critical business insight and to gain the high calibre which help us to go ahead in the world of business from the day of beginning. I have identified Consortium Securities Pvt. Ltd as an organization which provides financial services, deals in Equity and derivative, currency trading, training in financial…show more content… There are two parties in an option contract – one party takes a long position that is he buys the option while the other takes a short position that is sells the option. The one who takes a short position is the one who writes the option and is called the writer of the option. The choice always lies with the buyer of the option while the writer has only the obligation. The loss of the buyer is limited to the extent of the premium paid to writer and the profit of the writer is limited to that of the premium received from that of buyer. Black-Scholes Option Pricing Model is one which have earned a position among the most widely accepted of all financial models.
1.3 NEED FOR THE STUDY Black-Scholes model is one of the most important concepts in modern financial theory. The investor of option market find difficult to determine the fair market value of Call/Put option. Hence, the most widely used tool by the investors is Black-Scholes model which helps them to minimize risk and used as hedging…show more content… Most of the models and techniques employed by today’s analysts are rooted in a model developed by Fischer Black and Myron Scholes in 1973.
1.6 METHODOLOGY Research methodology is a way to systematically solve the research problems. It may be understood as a science of studying how research is done scientifically. It includes the overall research design, the sampling procedure, data collection method and analysis procedure. The study is descriptive in nature. This study is based on secondary data collected from company’s research area and the values are calculated using company’s trading platform. The information is also collected from individuals and analysed with the help of different statistical tools, for describing the relationship between various types of variables, pertaining to different investment options. As model considered for the study deals within its several tools and formulas for calculating each option sensitivity. Moreover cross table analysis has been done for processing the data and information is derived to meet the objectives of the