Journal Press India^®

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The Black–Scholes Option Pricing Model is a significant framework in financial market for pricing stock option based on the underlying stock value. This study investigates option pricing accuracy in the Indian options market, focusing on select power sector stock options across different moneyness levels and time to expiration period for both call as well as put options by using Mean Absolute Percentage Error (MAPE), the study found that there is significant differences in the model’s accuracy. BPCL stock options show the lowest pricing error (20%), where as NTPC has the highest (28%), the model performs best for DITM options but struggles with OTM options. in addition, shorter expiration periods have higher pricing errors, improving as time to expiration increases. These differences suggest that the model’s efficiency is not uniform across all stocks. These results highlight the model’s limitations in capturing short-term market fluctuations and pricing OTM options effectively.

Keywords

Option pricing; BSOPM; Pricing relevance; Power sector; Moneyness; Time to expiration

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