Lecture by: Mr. Chandan Kumar Singh
Assistant ProfessorDepartment of Commerce
Delhi College of Arts & Commerce
Lecture Date:- 24th April 2020Financial Markets & Institutions
B. Com. Prog.
6th Semester
Black-Scholes Option Pricing Model[ ] [ ])()()( 21 EXPVdNPdNOC ´-´=
( )rteEXEXPV -´=)(
factordiscount gcompoundin continuous1 ==- rtrt
ee
32 34 36 38 40
N(d1)=
Black-Scholes Option Pricing Model
tvtrd
vEXP )()ln( 2
1
2++=
Cumulative Normal Density Function
tvtrd
vEXP )()ln( 2
1
2++=
tvdd -= 12
Call Option
3070.1 -=d
tvtrd
vEXP )()ln( 2
1
2++=
ExampleWhat is the price of a call option given the following? P = 36 r = 10% v = .40EX = 40 t = 90 days / 365
3794.6206.1)( 1 =-=dN
Call Option
3065.6935.1)(5056.
2
2
12
=-=-=-=
dNd
tvdd
ExampleWhat is the price of a call option given the following? P = 36 r = 10% v = .40EX = 40 t = 90 days / 365
Call Option
[ ] [ ][ ] [ ]70.1$
)40(3065.363794.)()()(
)2466)(.10(.21
=´-´=
´-´=-
-
C
C
rtC
OeOeEXdNPdNO
ExampleWhat is the price of a call option given the following? P = 36 r = 10% v = .40EX = 40 t = 90 days / 365
Thank You
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