Question

Exercise 6 Given that the price of a non-dividend-paying share is 23 PLN and has a volatility of 30% use the Black-Scholes model to determine the value of a call option that has an exercise price of 20 PLN and 91 days to expiry (3/12 of a year). The riskless rate of return is 10%. prce of he share 23 PLN volatility S0%

Answer 1

A C Template - Black-Scholes Option Value 1 2 3 Input Data 4 Stock Price now (P) 5 Exercise Price of Option (EX) 6 Number of periods to Exercise in years (t) 7 Compounded Risk-Free Interest Rate (rf) 8 Standard Deviation (annualized o) 23 20 0.25 10.00% 30.00% 10 11 Output Data 12 Present Value of Exercise Price (PV(EX)) 13 G*tA 5 19.5062 0.1500 1.1734 1.0234 0.8797 16.5207 14 d1 15 d2 16 Delta N(d1) Normal Cumulative Density Function 17 Bank Loan N(d2)*PV(EX) 18 19 Value of Call 3.71 20 Value of Put 0.22 21

A Template - Black-Scholes Option Value 1 2 3 Input Data 4 Stock Price now (P) 5 Exercise Price of Option (EX) 6 Number of periods to Exercise in years (t) 7 Compounded Risk-Free Interest Rate (rf) 8 Standard Deviation (annualized o 23 20 0.25 0.1 0.3 10 11 Output Data 12 Present Value of Exercise Price (PV(EX)) 13 tA 5 -++C5*EXP(-C7*C6 =+C8 *C6 0.5 ++(LN(C4/C5)+(C7 +C14-C13 14 d1 15 d2 =NORMDIST (C14,0, NORMDIST(C15,0. 16 Delta N(d1) Normal Cumu lative Density Function 17 Bank Loan N(d2) *PV(EX) 18 19 Value of Call -+C16*C4-C17 20 Value of Put -+C19+C12-C4 21 22