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d1 in black Scholes model and normal distribution table

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › d1 in black Scholes model and normal distribution table

  • This topic has 3 replies, 2 voices, and was last updated 5 years ago by John Moffat.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • August 28, 2019 at 10:44 am #543492
    ishmero2006
    Participant
    • Topics: 9
    • Replies: 5
    • ☆

    Could you please explain how to get the area(probabilty) from the table,when you have a d1 of say, 0.8215. My calculation always falls short of .0001 and this is how I do it:

    I found the area(probability) corresponding to 0.82 as 0.2939. Then I found the area (probabilty)corresponding to 0.83 as 0.2967 . I calculated the difference the difference between these two probabilities 0.0028(0.2967-0.2939).Next I calculated the area of an extra 0.0015 to be 0.0004(0.0015/.01*0.0028). I then added this probability to that corresponding to 0.82 ie 0.2939 to get 0.2943(0.2939+0.0004).
    The solution gave me an answer of 0.2944. It appears I’m missing something.

    August 28, 2019 at 12:19 pm #543528
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54676
    • ☆☆☆☆☆

    The difference is purely due to rounding and is irrelevant for the exam. You would still get the marks is you just used the table figure for 0.82 and didn’t bother apportioning between the two figures!

    It will obviously result in a slightly different final answer, but in AFM it is not the final answer that gets the marks – it is the workings that get the marks (which is why it is so important to set out your workings in a way that is easy for the marker to follow).

    August 28, 2019 at 2:41 pm #543559
    ishmero2006
    Participant
    • Topics: 9
    • Replies: 5
    • ☆

    Thanks

    August 28, 2019 at 5:04 pm #543594
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54676
    • ☆☆☆☆☆

    You are welcome 🙂

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    Posts
Viewing 4 posts - 1 through 4 (of 4 total)
  • The topic ‘d1 in black Scholes model and normal distribution table’ is closed to new replies.

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