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I'm having the most difficult time trying to figure out the BSOPM.


S=18, X=15, r(f)=.03, var(x)=.04, t=18 months (1.5 years)

Find d(1) first

(LN(18/15)+(.03+.04/2)*1.5) / (.2*1.2247)=1.051

The find d(2)=1.051-.2449=.8058

Look each of these up on a normal probability table (it is ok to round to the closest value on the table):

Nd(1)=.8554; Nd(2)=.7882

C = S N(d1) - X*e^(-rt)*N(d2)


Intrinsic Value 18-15=3

So time value is 4.0944-3=1.0944


•    C is the market price of the call

•    S is the current value of the underlying spot asset

•    N(d1) is a complicated probability that most agree is the hedge ratio of a risk free spot/option portfolio.

•    X is the exercise price or strike price

•    e^(-rt) is a continuous time present value function

•    N(d2) is another probability

My professor indicated that you can set this up in Excel and everything that i input his not correct. Is there a way to explain this so I can use it in Excel or overall? I can send over my Excel doc and may there is an issue with my formula.

I am unable to attach my document that provides further information, is there a way to send this via email?

Thank you,


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