Hey y’all, do you think we need to memorize the BS formulas (LOL)? The LOSs state to explain the assumptions and explain how a price is affected by the Greeks but no where does it say to calc anything… thoughts?

Only know the inputs. Drill - is the vol a measure of the vol on the STOCK or the OPTION?

the stock

I think I ought to start answering this question “Yes” since everyone somehow wants to. What would you do with it?

I just did a qbank question that asked me to price one using Black-Scholes: …Coleman has given her software that provides a variety of analytical information using three valuation approaches: the Black-Scholes model, the Binomial model, and Monte Carlo simulation. Barlow has decided to begin her analysis using a variety of different scenarios to evaluate option behavior. The data she will be using in her scenarios is provided in Exhibits 1 and 2. Note that all of the rates and yields are on a continuous compounding basis. Exhibit 1 Stock Price (S) $100 Strike Price (X) $100 Interest Rate ® 7% Dividend Yield (q) 0% Time to Maturity (years) 0.5 Volatility (Std. Dev.) 20% Barlow would first like to insure that she understands how to use the Black-Scholes option pricing model. Using the information shown in Exhibit 1, she computes the value of a European call option. Which of the following is closest to Barlow answer? A) $7.06. B) $7.27. C) $7.38. D) $7.85. She would now like to compute the value of the corresponding put option. Using the information in Exhibit 1, which of the following is closest to Barlow’s answer? A) $3.94. B) $3.79. C) $4.41. D) $4.64.

The way I tried to solve this one was by using put-call parity to get the difference between the put and the call - this gave me a 50:50 chance of 0 marks or 2 marks. Should I ask Schweser if this question is out of date?

I don’t know, but the video suggests that you remember the main formula. Eventhough the LOS says to know the inputs .

Did you enjoy doing that and did it take some reasonable amount of time?

JoeyDVivre Wrote: ------------------------------------------------------- > Did you enjoy doing that and did it take some > reasonable amount of time? ???