Black-Scholes Example

The historic prices for an asset and their dividends are listed in Table 7-2below. Given this data, calculate the call and put prices for the asset. The example is calculated with RPN set as the operating mode.

First, enter the historical asset prices and the dividend as ordered pairs in the Data menu. Enter the historical prices for the x values, and the dividend for each y value. For more information about entering data in the Data menu, see Chapter 12, Statistical Operations.

Table 7-2

Historical Asset

Dividend (y)

Price (x)

 

 

 

80

3

 

 

85

5

 

 

78

1

 

 

72

0

 

 

Open the Black-Scholes menu. Use the arrow keys, <or >, to scroll through the menu. With the menu item displayed, key in the value in the right column of the table followed by

I:

Table 7-3

Menu item

Value

 

 

Stock Price

74

 

 

Strike Price

72

 

 

Time to Maturity

0.3 (years)

 

 

Risk Free%

5

 

 

Volatility%

8.21

 

 

Dividend%

2.73

 

 

54 Black-Scholes Calculation Menu*