Black-Scholes Option Pricing Model

Simulation of a Geometric Brownian Motion with Java

Ester Hlav, May 2017

This program is an Option Pricing Model based on the Black-Scholes formula. It includes both an Option Pricing Calculator as well as a Geometric Brownian Motion Simulator based on a random generator. Additionaly, based on parameters given by the user, the program can calculate implied volatility and Greeks (i.e. the derivatives of an option value regarding the different factors such as stock price, strike price, volatility etc.) as well as output diagrams of option payoff and volatility smile. All calculated and simulated outputs are well-known concepts in the field of quantitative finance and derivative contracts and are using parameters from the Black-Scholes formula. Finally, a GUI with a brief introduction to options and option pricing was developed for users new to the field of quantiative finance.

Modules

PART A - Introduction to Calls and Puts

• Slides
• Quizz

Demo

PART B - Option Pricing Calcualtor and Brownian Motion Simulator

1- Computation

• Computing the Option Price
• Computing the Implied Volatility
• Computing the Greeks

2 - Simulation

• Geometric Brownian Motion
• Payoff/Value Diagram
• Volatility Smile

Demo

Run the code

In directory /Code/.

To compile:

$ javac OptionPricing.java

To run:

$ java OptionPricing