| Summary: | In stock and options trading, exchanges often imposed restrictions on the
daily price changes of an asset. As a result, the range of asset returns (in
logarithmic form) are no longer in the interval (- �, �), but truncated at the
bottom and top. Consequently returns no longer normally distributed, but
normally truncated distribution. Therefore, in this thesis will be discussed
regarding the European option pricing using Normal Truncated Distribution on
asset returns.
Furthermore, we compare the option price obtained by the normal
truncated distribution approach and the Black-Scholes model with option�s
market price. As a result, option pricing using normal truncated distribution
closer to the market price than the Black-Scholes model.. So we can conclude
empirically, the theory of option pricing models with normal truncated
distribution approach suitable for the option that has restrictions on its stock
price changes.
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