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Hello,
I have somewhat of a technical question resulting from my quest to
understand options. I am setting up some option models (Black/Schole) in a
Excel spreadsheet, so I can vary parameters, such as volatility, over the
life of the option to see the effects graphically. Anyway, I can calculate
the strike price, but I am having a hard time calculating implied
volatility. I thought simple algebra would work, but I am not sure how to
handle NORMSDIST().
The following is the formula for the Option Price ;
Call Price=Stock*NORMSDIST((LN(Stock/Strike)+(Rate+Vol*Vol/2) *Time) /
(Vol*SQRT(Time))) -
Strike*EXP(-Rate*Time)*NORMSDIST((LN(Stock/Strike)+(Rate+Vol*Vol/2) *Time)
/ (Vol*SQRT(Time))- Vol*SQRT(Time))
Where;
Stock= Stock Price
Strike = Strike Price
Rate = Risk Free Interest Rate
Time = Days to Expiration / 365
Vol = Volatility
Note: I tested the results against OptionScope in Metastock and it yields
the right result.
If any knows or can figure out what the Excel formula should be to
calculate Volatility, I would greatly appreciate it.
Also, I have been searching for the formulas for Theta, Gamma, Delta and
Vega. If anyone knows where I can find these, please let me know.
When I complete this spreadsheet, I am willing to send it to any others who
would like to use it to gain a better understanding of the Black-Scholes
model.
Thanks to all,
Charles F. Corbit III
ccorbit@xxxxxxxxxxx
http://home.sprynet.com/sprynet/ccorbit/index.htm
The Soft Tools Company
http://www.soft-tools.com
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