TY  - DATA
AU  - Garg, Tanuj
TI  - Analysis of the gosset option pricing formulae in the Indian options market
U1  - SP2023/3655 
PY  - 2023///
CY  - Ahmedabad
PB  - Indian Institute of Management
KW  - Option pricing
KW  - Financial models
KW  - Hedging (Finance)
N1  - Submitted to Prof. Vineet Virmani

Submitted by: Tanuj Garg
N2  - Option pricing is an area of considerable interest and has been studied extensively over the last five decades. It allows investors to calculate the fair value of options and make informed investment decisions, including hedging decisions. The foundation of an analytical approach to option pricing was laid by Fischer Black, Myron Scholes, and Robert Merton in 1973 when they proposed the Black-Scholes-Merton (BSM) model for pricing options (Black & Scholes, 1973).

However, the assumptions of the Black-Scholes model don’t hold in real market situations, and several attempts have been made at improving the BS model by relaxing the assumptions (Heston, 1993). Gosset formulae are one of the alternatives that relax the assumption of normality of the log stock returns made in the BSM model and rather assume a Student’s t distribution (Cassidy et al., 2010).

We analyze the applicability of Gosset formulae in the Indian options market by calibrating the parameters of the model to market data. We also investigate the stability of parameters obtained post-calibration to market data. Finally, we present a comparative analysis between the Gosset formulae and more established models like Heston’s model
ER  -