this question came up:
Bob Dilla, CFA makes the following statement about call options:
“Call options on stock can be thought of as leveraged stock investment where N(d1) units of stock is purchased using e-rTXN(-d2) of borrowed funds”.
should we learn black scholes and all the complicated rules about this for dervs?
You should be able to interpret the model well, i would suggest follow the LOS closely…while we dont need to memorize the formula, we need to understand every way in which it can be interpreted
You need to know the formula and the meaning. For example, Nd1 is the probability that the call option will expired in the money. You need to know the black model formula as well.
not entirely i think… i mean we dont need know how to calculate Nd1 and Nd2, right?
No, you need to know how to interpret them
But if they give you Nd1, you should know how to calculate N(-d1)
Yeah, as long as its just that, i think i can manage