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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › Black-Scholes model – value option
Hi. I have a question regarding value call option and N(d) e.g
d1= 0.6
d2=0.4
N(d1)= 0.5 + 0.2257 = 0.7257
N(d2) = 0.5 – 0.1554 = 0.3446.
Are my calculations of N(d2) correct? Or it should be also “+” (0.5+0.1554?)
Maybe I do not understand it correctly or there is a mistake in the book..
Thank you for the help.
Angelika
In both cases d is positive i.e. greater than zero, and so in both cases you should add 0.5.
We only subtract from 0.5 if d is negative (i.e. less than zero).
Have you watched my free lectures on using the Black Scholes model?