Black-scholes Flashcards
1
Q
Delta of a call
A
N(d1)
- tells you how many shares to hold per option
2
Q
Delta of a put
A
N(d1) - 1
- always negative
3
Q
Delta
A
Measures the sensitivity of the option value to changes in the underlying asset price
4
Q
Put call parity formula
A
P = C + Xe^(-rT) - S0
5
Q
Implied volatility
A
Using current option price formula to solve for standard dev (aka volatility)
- is the markets estimate of volatility
- use black-scholes model
6
Q
N(-d1) =
A
N(-what you calculated d1 to be) = 1- table figure for d1 = FINAL ANS
7
Q
If d1/2 is negative
A
Take its absolute value