- This topic has 4 replies, 2 voices, and was last updated 9 years ago by
.
- Posts
In this question we need to find the delta value,
Delta of Call option = N (d1)
Delta of Put option = N(d1)-1D1= -0.055 and D2= -0.218
While calculating delta of Put option
N(-d1)= 0.5+0.0199+(0.0239-0.0199)/2 = 0.5219
N(d2)=0.5+0.0753+0.3x (0.0793-0.0199)/2=0.5765Why they’ve done like this, it could be done simple as N(d1)= 0.5-0.0199=0.4801
Please explainIn part b of this question To find the option value to delay
D1 is 0.617 and D2 is 0.193
FOr N(d1)= 0.5+0.2291+0.7x(0.2324-0.2291)= 0.7314
N(d2)= 0.5+0.0753+0.3x(0.0793-0.0753)=0.5765
How did they calculate?In future, you must ask in the Ask the Tutor Forum if you want me to answer – this forum is for students to help each other.
A few things:
Firstly, d1 is negative, and therefore (-d1) is positive. So for N(-d1) we add 0.5 to the table value, so it is 0.5 + 0.0199 (not 0.5 – 0.0199).
(The extra bit (0.0239-0.0199/2) is not really necessary in the exam – it is apportioning between the table values for 0.51 and 0.52 because the tables only let you look up for 2 decimal places).Secondly, I don’t know which question and answer you are looking at, but I am looking at the original question and the examiner’s answer. He does not calculate N(d2) for part (a) – it is not needed!!
Thirdly, (and the same as above really) part (b) of the original question does not ask for any calculations for an option to delay, and so I do not know what you are asking about.
Ok thanks, I got the part a, my mistake for N(d2) in part a, it wasn’t required,
but b asks to estimate the financial impact of the director’s decision to delay the production of game using BSOP Model
Part b as aforesaid And they used call option to value the delay of project
And I apologize I just noticed that drop down list contains a separate head of Ask the tutor p4., I’ll keep that in mind for next topic and i hope it’s okay to continue this thread here
- You must be logged in to reply to this topic.