Dear John,
Sir, I have a doubt on how many decimal places you have to round off while calculating the value of call/put/real options using Black Scholes Model.
I tried doing a revision kit question and my answer did vary (basically the table numbers) just because I didn't round off to two digits for (d1) and (d2). Will that be a problem for the exam?
Thank you
ACCA Forums
AFMBlack-Schole Model
10y ago#1In future please ask in the Ask the Tutor Forum if you are wanting an answer from me. This forum is for students to help each other.
As you will have seen in my lectures on option pricing, I always calculate d1 and d2 to 4 decimal places initially. However, you then have to round them to 2 decimal places to be able to look them up in the tables and find N(d1) and N(d2).
(What the examiner often does is approximate between table values - for example, if d1 were to come to 1.332 he takes the table value for 1.33 plus 2/10 of the difference between the table values for 1.33 and 1.34. However there is no need to do this to get the marks - I simply round to 1.33 and use the table value for 1.33.)
Okay, thank you Sir... And yes, I am sorry for posting the question in the wrong forum. Will see to that next time.. :)
10y ago#3You are welcome :-)
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