The Effect of Market Sentiment and Information Asymmetry on Option Pricing
Zghal, I., Hamad, S.B., Eleuch, H. and Nobanee, H., 2020. The effect of market sentiment and information asymmetry on option pricing. The North American Journal of Economics and Finance, 54, November, p.101235.
32 Pages Posted: 12 Jan 2021
Date Written: November 5, 2020
This work addresses the impact of imperfections, such as information asymmetry and market sentiment, on the performance of option pricing models. More precisely, this work compares the option pricing model of Black and Scholes and the same model in the presence of imperfections. This study is based on S&P 500 options that cover the period between 17/03/2000 and 14/06/2013. The achieved results show that, in general, in the presence of imperfections, the model is more effective than the Black and Scholes model. This research appears to be promising for the incorporation of imperfections into the assessment of options.
Keywords: option pricing, market imperfections, information asymmetry, market sentiment, put-call parity
JEL Classification: G13, G14
Suggested Citation: Suggested Citation