Empirical tests of the Black-Scholes option pricing formula
A)have faced difficulties due to nonsynchronous data.
B)suggest that when using simultaneous price data and incorporating transaction costs they conclude that the PHLX American currency options are efficiently priced.
C)suggest that the European option-pricing model works well for pricing American currency options that are at- or out-of-the money, but does not do well in pricing in-the-money calls and puts.
D)all of the above

Question

Quizplus · Accepted Answer

Empirical tests of the Black-Scholes option pricing formula have faced difficulties due to nonsynchronous data. However, when using simultaneous price data and incorporating transaction costs, studies have concluded that the PHLX American currency options are efficiently priced. Additionally, studies suggest that the European option-pricing model works well for pricing American currency options that are at- or out-of-the money, but does not do well in pricing in-the-money calls and puts. Therefore, all of the above choices are correct.

Empirical Tests of the Black-Scholes Option Pricing Formula