The effect of market sentiment and information asymmetry on option pricing

Imen Zghal, Salah Ben Hamad, Hichem Eleuch and Haitham Nobanee

The North American Journal of Economics and Finance, 2020, vol. 54, issue C

Abstract: 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 (search for similar items in EconPapers)
JEL-codes: G13 G14 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:54:y:2020:i:c:s1062940820301327

DOI: 10.1016/j.najef.2020.101235

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