BLKSHCLPRC Function

Arguments

E

is a non-missing, positive value that specifies the exercise price.

Requirement:

Specify E and S in the same units.

t

is a non-missing value that specifies the time to maturity.

S

is a non-missing, positive value that specifies the share price.

Requirement:

Specify S and E in the same units.

r

is a non-missing, positive fraction that specifies the risk-free interest rate for period t.

Requirement:

Specify a value for r for the same time period as the unit of t.

sigma

is a non-missing, positive fraction that specifies the volatility of the underlying asset.

Requirement:

Specify a value for sigma for the same time period as the unit of t.

The BLKSHCLPRC function calculates the call prices for European options on stocks, based on the Black-Scholes model. The function is based on the following relationship:

where

where

t	specifies the time to expiration.
r	specifies the risk-free interest rate for period t.
	specifies the volatility (the square root of the variance).
	specifies the variance of the rate of return.

For the special case of t=0, the following equation is true:

For information about the basics of pricing, see Using Pricing Functions.

The BLKSHCLPRC function calculates the call prices for European options on stocks, based on the Black-Scholes model. The BLKSHPTPRC function calculates the put prices for European options on stocks, based on the Black-Scholes model. These functions return a scalar value.

----+----1----+----2--

a=blkshclprc(1000, .5, 950, 4, 2);
put a;

831.05008469

b=blkshclprc(850, 2.5, 125, 3, 1);
put b;

124.53035232

c=blkshclprc(7500, .9, 950, 3, 2);
put c;

719.40891129

d=blkshclprc(5000, -.5, 237, 3, 2);
put d;

           0

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