Black-scholes Flashcards

1
Q

Delta of a call

A

N(d1)

  • tells you how many shares to hold per option
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2
Q

Delta of a put

A

N(d1) - 1

  • always negative
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3
Q

Delta

A

Measures the sensitivity of the option value to changes in the underlying asset price

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4
Q

Put call parity formula

A

P = C + Xe^(-rT) - S0

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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
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6
Q

N(-d1) =

A

N(-what you calculated d1 to be) = 1- table figure for d1 = FINAL ANS

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7
Q

If d1/2 is negative

A

Take its absolute value

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