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There are 2 types of the Black Scholes Options Pricing Model.
1 has come up regularly on exam papers in the past but the Forex Modified Black Scholes Option Pricing Model has never come up. It did however appear on a pilot paper. Is this model one that needs to be covered in as much detail as the regular Black Scholes Option Pricing Model?
Thanks.The Forex Modified model is no longer in the syllabus (and the formula no longer appears on the formula sheet).
The previous examiner introduced it, but never asked a question on it (and in fact the formulae he gave were not correct).
You can now only be expected to use the regular Black Scholes formulae (and you cannot be asked to price foreign exchange options).
In BSOP model, there are d1 and d2, but I don’t understand what they are. Do I need to know it, pls? Thanks.
Yes – you do need to know what d1 and d2 are, otherwise you cannot calculate the price of the option.
The formulae for calculating d1 and d2 are given on the formula sheet.
Have you watched my lecture on this? It explains how to use the formulae.
I know the formula, I mean do I need to know the meaning of d1 and d2, or else just need to know how they look like? Thanks.
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