Do we need to memorize the Black Scholes formula??

… OR we only need to know the changes in inputs and how that would impact the call/put option prices?

There is no LOS that says that you have to compute an option value using the B-S-M model.

(However, I have heard from former Level II candidates that they were asked to do so on the exam. You pays your money and you takes your chances.)

but if it’s not in the LOS, then shouldn’t such questions be discounted if it appears in the exam?

That’s not the question to ask.

The question to ask is: are you willing to bet another year’s studying for Level II on it?

It’s only one more formula to remember, on top of hundreds of others. Your marginal cost of retaining one more formula is low.

From my understanding with those lengthy and daunt formulas chances are we won’t have to calculate a value but rather interpret the inputs.

I thought that the CFAI would not test you on anything unless it was stated in an LOS.

Learn it. Know it. Live it.


My approach was to know the variables and how changes in each affected the output. I believe that was consistent with the LOS’s (2016 text) as I interpreted them. I did not memorize the formula, and if there were question(s) on the exam, I was prepared for them.

The candidate who told me that they _ did _ test on it thought the same thing.

I think it is not required.

Just the application and the input vs effect on option price will be examined.


Hi all… just wondering, will the Std. Norm Dist CDF be provided as a table? Not sure if the approved calc would be able to compute that.

If asked to interpret, there would likely be a table with the values you need.

You should plan on knowing the values that correspond to 68%, 90%, 95%, and 99% confidence intervals. If they ask for anything else, they’ll give you an excerpt from a table.


My pleasure.