Between Theory and Reality: A Comparative Evaluation Of Option Pricing Models Across Financial And Commodity Assets

The dissertation examines option valuation using three models: Binomial, Black-Scholes, and Heston with stochastic volatility. Its aim was to assess how well each model approximates market prices and under which conditions they perform best. Two underlying assets were studied (Apple stock and the GLD gold ETF), across different price levels (low, medium, high) and option moneyness profiles (ITM, ATM, OTM). Monte Carlo simulations were applied for expired options, while live options were compared directly with market prices. Results show that the Binomial and Black-Scholes models perform well for ATM options but lose accuracy for ITM and OTM cases. The Heston model, although theoretically more robust, was harder to calibrate due to parameter estimation challenges.