Abstract:
Refer to PSAK No. 71 that regulates the recognition and measurement of financial
instruments, option value shall be determined on the basis of its fair value from its
market price. However, as Indonesia does not apply market price for option, it is
critical to look up for alternative method in measuring the value of option. One of
the option pricing method that can be applied is binomial decision tree. This
research will test whether binomial decision tree method can be applied to comply
with the PSAK No. 71. In addition, there will be comparison with Black-Scholes
model. Analysis was performed on stock of BBCA, a banking company listed on
the Indonesia Stock Exchange as the underlying asset of option and result shows
that binomial decision tree method is able to fulfill PSAK No. 71 compared with
Black-Scholes method.
