Financial Derivatives Assignment -

Task: "...Black and Scholes (1973) treat stock options as redundant securities as their payoffs can be replicated in continuous time by investments in stocks and bonds. Thus, the existence of options markets should not have any impact on the market quality of the underlying stocks..." Discuss this statement and provide a critical evaluation of the relevant theoretical and empirical literature.

Attachment content is the subject of the entire group report, but you don't need to write it all, just write a part. What you need to write is option markets should not have any impact on the market quality of underlying stocks.

Attachment:- Assignment File.rar