Black Scholes formula

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February 6, 2017 at 10:40 am #371306
Abdul Rafay
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Sir I know u said u don’t have the BPP study text but in the back of it we have a question with d1 being 1.998 and d2 being 1.898.
Now 1.9 corresponds to 0.4767 and 1.8 corresponds to 0.4706 on the ND tables.
Now in the books answer Nd1 is calculated as 0.5+0.4767+( (82/100) x (0.4772-0.4767) )
[0.4772 being the corresponding value for 2.0 on the ND table]
Now I know why we add 0.5 but whats the latter addition for?
February 7, 2017 at 5:55 am #371404
John Moffat
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It is apportioning between the two. However you do not need to do this in the exam to get the marks.
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