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Black-Scholes model – value option

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › Black-Scholes model – value option

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  • April 28, 2021 at 8:11 pm #619109
    Angelika0612
    Member
    • Topics: 1
    • Replies: 0
    • ☆

    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

    April 29, 2021 at 7:44 am #619146
    John Moffat
    Keymaster
    • Topics: 56
    • Replies: 51582
    • ☆☆☆☆☆

    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?

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