Pricing of options, that is calculation of premium, can be done under various methods. Black-Scholes Model and the Binomial Model are the most commonly used methodologies for theoretical calculation. If actual premium is different, derivative traders become active enough to make the actual price converge with the model outputs. However, the assumptions regarding interest rate and volatility may be different for some traders. Such traders are normally more active.
Many calculators are available for finding the theoretical premium for call and put options. Here is one such:
http://www.fintools.com/resources/online-calculators/options-calcs/options-calculator/
It will be interesting to modify various assumptions and look at the impact on option prices.
Many calculators are available for finding the theoretical premium for call and put options. Here is one such:
http://www.fintools.com/resources/online-calculators/options-calcs/options-calculator/
It will be interesting to modify various assumptions and look at the impact on option prices.
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