Black Scholes Model
About the Lecture
The lecture Black Scholes Model by Edu Pristine is from the course Archiv - Financial Markets and Products. It contains the following chapters:
- Black Scholes Model
- Historical Volatility and Implied Volatility
- Limitations of Black Scholes Model
- Summary
Author of lecture Black Scholes Model
Edu Pristine
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Excerpts from the accompanying material
... paying stocks The formula is: Where, Log is the natural log with base e. N (d) = cumulative normal probability density function. X = exercise price option; T = number of periods to exercise date. P = present price of stock? = standard deviation per period of ...
... be reduced from the present price of the stock: 3 Without Dividend With Dividend Price of stock now 85 85 Present value of dividend 0 1.99 Price of stock adjustment for dividend (P) 85 83.01 Exercise price (EX) 85 85 Standard deviation of continuously compounded annua ...
... Volatility (IV). Model implied variability. Black Scholes model can be used to determine Implied Volatility. Forward ...
... valuing American Options that can be exercised any time during their life. The stepwise binomial method is superior for valuing American Options, particularly American Puts and American Calls on stocks that pay dividends ...
... method European options on non dividend paying stocks can be valued using the Black Scholes method Option Delta is ...
... is equal to the difference between the pay-offs from the option and pay of fs from the delta shares This package has the same pay-off as a call option The value of the package is the value of ...
... price Assume investors are risk neutral Discount the future expected pay-off at ...
... is the natural log with base e. N (d) = cumulative normal probability density function. X = exercise price option; T = number of periods to exercise date. P = present price of stock? = standard deviation per period of (continuously compound ed) rate of return ...
... derive Implied Volatility. Reflects market opinion in the ...
... pay €200,000 for the property. However, Company X must also provide the buyer with a put option to sell the property back to Company X for €200,000 at the end of 2years. Moreover, Company ...
... Expectations regarding the movement of the price of the underlying ...
... Earning a return from the underlying that is already owned. Lowering the cost of acquisition of the underlying asset Expectation. Moderate rise in the price of the underlying ...
... or more, the call option holder will exercise his option and the investor's profit will be $35-$32 = $3. If the stock price at expiry is below $35 but above $32, the call option will be allowed to expire, but the investor can still profit by selling his shares. Only if the price is ...
