Black Scholes Option Pricing Model
Stock Price = 75 Strike price = 70 Risk Free rate - 4% Standard deviation = 15% 5 months remaining
Calculate call & Put and show work please
d1=[ln(S/X) + (R – d + σ^2 / 2) × t] / (σ ×t^0.5) =[Ln(75/70)+(4%-0%+15%^2/2)*5/12]/(15%*5/12^0.5) =0.9331
N(d1) using NORMSDIST function of excel =NORMSDIST(0.9331)
=0.8246
d2 =d1-σ*t^0.5 =0.9331-15%*5/12^0.5=0.8363
N(d2) using NORMSDIST function of excel =NORMSDIST(0.8363)
=0.7985
Call Option =C = S * N(d1) – X × e–Rt × N(d2)
=75*0.9331-70*EXP(-4%*5/12)*0.7985 =6.69
P=C0-S0+X*EXP-rt =6.69-75+70*EXP(-4%*5/12) =0.53
Black Scholes Option Pricing Model Stock Price = 75 Strike price = 70 Risk Free rate...
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