if probability of option being exercised increases, the value of that option decreases.. that does not sound right, does it...(?)
@tristanbosnyak8632 Жыл бұрын
this helped me on my journey to calculate my fathers monthly hair loss
@hernanalzate15826 ай бұрын
what a shame, the excel spreadsheet no longer exists!
@speisequark22 жыл бұрын
Is it ok to use a negative riskfree rate r in that model?
@benpierce22025 ай бұрын
Which version of John Hull's book do you use for this example?
@mitchellrosenthal63054 жыл бұрын
Can you explain what the terms inside of "d1" actually mean? I believe d1 is a Z-score of some type.
@riverallen15713 жыл бұрын
I recommend actually watching the video if you want to know what d1 means.
@ohad1573 жыл бұрын
I love it that you have a gamer's channel name
@Alexander-pk1tu2 жыл бұрын
thank you sir! I liked your video very much.
@shahbazh25303 жыл бұрын
What is the sound of the cricket?
@ammadurrahman5321 Жыл бұрын
awesome xplaination;;;;;
@penspinner2 жыл бұрын
For the calculation of d1 and d2, does the So number in ln (So/k) change when dividend yield is introduced? In the GARP textbook it seems like it does not change for continuous dividend, but for discrete dividend they would replace So with (So - discounted discrete dividend).
@bgvianyc3 жыл бұрын
When returns are not normally distributed could one simply replace the normal distribution with the alternative distribution or are additional changes required to the formula?
@speisequark22 жыл бұрын
Thank you so much! Your video helped me a lot!
@riverallen15713 жыл бұрын
Do you have any opinions on using delta as an approximation to probability of in the money?
@Hamromerochannel Жыл бұрын
This was by far the best explanation of d1 and d2. Thank you
@annabellam.49835 жыл бұрын
That uploaded excel sheet was super great!! Thanks a lot!
@bionicturtle5 жыл бұрын
Thank you for watching! We are happy to hear that it was so helpful.
@katienorris83413 жыл бұрын
Thanks, this is a great explanation! Very helpful
@etenat87725 жыл бұрын
amazing explanation
@bionicturtle5 жыл бұрын
Thank you for watching!
@ttijp1533 жыл бұрын
Thank you so much professor! so helpful.
@johnpalma72654 жыл бұрын
Nice
@hbahou5 жыл бұрын
if N(d1) is the option's delta, why don't we just refer to it as 'delta' in the BSM formula instead of confusing everybody?
@bionicturtle5 жыл бұрын
Sometimes words alone are confusing, when you really want to understand something or are quantitatively inclined. As a normal CDF, it has familiar properties, some discussed; e.g., it is a probability function. But "delta" by itself, could be ambiguous. The put option's delta, for example, is N(d1) - 1. If the stock pays a dividend, then "delta" is N(d1)*exp(-qt). I realize some people just want easy words because, you know, math is hard, but under your approach, people are likely to confuse all "deltas" with N(d1), or if the stock pays a dividend, to forget the delta is N(d1)*exp(-qt). So your approach would be more confusing IMO.
@mff8124 жыл бұрын
Very good effort Sir
@victorlh74174 жыл бұрын
In the formula of d1 and d2 the part of (r + sd^2/2) T, what does that measures?
@sujan61463 жыл бұрын
mean of the data
@TrangHuyen-vj3ne5 жыл бұрын
what is dividend yield in black scholes used for? can i find dividend yield in financial report of company?
@etenat87725 жыл бұрын
you can calculate dividend yield yourself. it's dividend per share/price of stock. When dividends are paid out it reduces the stock price by that amount (assuming no frictions). this topic is about price appreciation so we need to consider how dividend payments restrict capital appreciation
@tradegood5 жыл бұрын
you can easily get it by: (cash dividend/current stock price) -> 10$/25$ = 40% DY. Dividend is usually a part of the profit that the company shares with its shareholders (approved during shareholder meeting)
@johnpalma72654 жыл бұрын
Trang Huyen : Many of the Black Scholes videos don't include the dividend in the formula.The dividend sometimes denoted by (q) is included to get a more accurate result for d1 in cases where there is a dividend.
@indradipbanerjee40135 жыл бұрын
Should the stock be assumed to grow at the risk free rate or should the baseline be growth at cost of equity rate?
@sigmamu67455 жыл бұрын
Stock grows at drift rate. Mu. Look it up.
@jiaminzhu4064 жыл бұрын
Great explanation. I'm still a bit confused with N(d1), when you say the underwater price is counted as zero. If I denote p1 = N(d1) and p2=N(d2), and forget assume q and r are both zero, is it true that Sp1 = (S-K)p2 + K ?
@richardreid80164 жыл бұрын
I believe N(d2) is the probability that the option will end in the money and N(d1) is how far in the money will it end up.
@易哲源8 ай бұрын
N(d1) is the conditional probability by assuming S>K and thus SN(d1) is the conditional expectation of S. Note that N(d1) would always bigger than N(d2) due to the conditional probabilities. Mathmatically, SN(d1) = E(S|S>K)*N(d2).
@lawjef5 жыл бұрын
I know you de-emphasized it in the sheet (denoted by the light grey font) but the "d2" formula is technically incorrect. The part on the far right "d1 - sigma * sqrt(T)" is correct, but the formula to the left of it should be "[formula that is already there] - sigma * sqrt(T)"
@bionicturtle5 жыл бұрын
Actually the d1 and d2 are CORRECT. σ*sqrt(T) = σ^2*T/[σ*sqrt(T)], is how the (+σ^2/2) switches to a (-σ^2/2). But thanks for the feedback.