Black Scholes Model

This topic has 3 replies, 3 voices, and was last updated 9 years ago by John Moffat.

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October 29, 2016 at 8:38 am #346520
Muslim Farooque
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hello sir, i wanted to know whether the black scholes model can be used to value equity of a company that is being acquired and therefore can it be another method apart from P/E ratio etc to value a company
October 29, 2016 at 8:46 am #346527
John Moffat
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Yes – it can be used to value equity (although the examiner will specify if he wants this approach) 🙂
October 29, 2016 at 10:42 am #346535
danieljamesglover
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Hi John,

I am having trouble with this equation. I have a big weakness when it comes to these equations as I am always unsure of brackets and the order of input into the calculator.

0.6664 * 23.13 – 0.4443 * 24 * E(2.71828) ^ – 0.06 * 2

I get 4.67, however the Kaplan study text gets 5.95

Is this a mistake on Kaplan’s part?

Thank you
October 29, 2016 at 12:55 pm #346555
John Moffat
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It comes to:

15.4138 – 0.4443 x 24 x 0.88692

= 15.4138 – 9.4574 = 5.956

(You should have a calculator with an ‘e^x’ button on it, and it is easier if you use that 🙂 )
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