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Valuing call option using black-scholes formula and calculating expected option returns using CAPM - an analysis in banking and finance industry for the year 2005-2011

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As one of financial derivatives, options hold an important role in risk management as its main function is hedging the risk. Options were once traded in Indonesia back in 2004, but due to the low demand they are no longer active. However, options trading in Indonesia is planned to be re-activated by 2012. This thesis estimates the value of call options using Black-Scholes formula and analyzes the gains or losses resulted from the call options. This thesis also calculates the expected option returns using CAPM and compares it with stock returns. The comparison is further statistically tested using t-test. The analysis is conducted towards banking and finance industry for the year 2005-2011. From the research it is found that call option is resulted in more gains compared to loss. And even when the global crisis occurred in 2008 call option was still considered as favorable. It is also found that call option return is about 3.42 - 4.71 times higher than stock return. These findings support the development of call options in Indonesia and convince people that option is a favorable investment.

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Availability

B01249

(wh)

Available

Detail Information

Series Title

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Call Number

1249

Publisher

: Swiss German University., 2012

Collation

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Language

English

ISBN/ISSN

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Classification

NONE

Content Type

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Media Type

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Carrier Type

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Edition

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Subject(s)

Acctg

Specific Detail Info

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Statement of Responsibility

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