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 options

Question

Quizplus · Accepted Answer

The statement mentions difficulties faced in empirical tests due to nonsynchronous data, but also suggests that when using simultaneous price data and incorporating transaction costs, the PHLX American currency options are efficiently priced. Additionally, it mentions that the European option-pricing model works well for pricing American currency options that are at- or out-of-the money, but not for pricing in-the-money calls and puts. Therefore, all of the options (A, B, and C) are correct.

Empirical Tests of the Black-Scholes Option Pricing Formula