STOCHASTIC ANALYSIS OF EUROPEAN PUT OPTION ON SHARE PRICE CHANGES PRICES

In this paper, the Black-Scholes model of put option were investigated on the share prices of Fidelity, Access and Merged Banks; which paved way to obtain put option close form prices. The table results were presented on disparities of put option prices at specified time frame and the effect of the relevant parameters were discussed. Also, the put option prices with two different maturity dates shows that investor or the banks are more flexible to adjust positions based on changing market conditions. A larger difference between two put option prices with different expiration dates generally indicates a greater degree of volatility in the price of the underlying security to be more volatile, and will generally price the option with longer expiration date higher reflecting the increased potentials for the option to be in the money at expirations for Fidelity, Access banks and Merged banks. In comparing the share prices of the banks; it was discovered that merged bank has the highest mean and standard deviation of share prices which inform investors or bank management that the stock will perform well and likely grow in value. Finally, analysis of share prices were conducted using minimum variance criteria of each independent banks under-study where proposition were stated and proved to show levels of share price changes.