I. Introduction
THIS STUDY IS A descriptive analysis of how market prices of call options compare with prices predicted by the Black and Scholes [2], B-S, option pricing model. Although tests of alternative call option valuation models are not conducted, it is possible to relate some of the deviations which we observe between market and B-S model prices to predictions of other models, and thereby reconcile conflicting statements in the empirical literature regarding the relationship between market prices and B-S model prices.The B-S model: * University of Texas at Dallas. We thank Ross Lurnley for computational assistance and Ruth Friedman for assistance with collection of data.
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