S

Rf

Expiry

B-S

Actual

S = current Stock price

$35.00

$20.00

5.0%

20.0%

18-Mar-05

-8.35

#NUM!

$15.40

$35.00

$22.50

5.0%

20.0%

18-Mar-05

-8.35

#NUM!

$12.90

$35.00

$25.00

5.0%

20.0%

18-Mar-05

-8.35

#NUM!

$10.40

$35.00

$27.50

5.0%

20.0%

18-Mar-05

-8.35

#NUM!

$7.90

$35.00

$30.00

5.0%

20.0%

18-Mar-05

-8.35

#NUM!

$5.50

$35.00
$35.00

$32.50
$35.00

5.0%
5.0%

20.0%
20.0%

18-Mar-05
18-Mar-05

-8.35
-8.35

#NUM!
#NUM!

$3.20
$1.43

K = strike price
Rf = Risk-free rate
V = Volatility
Expiry = Expiry date
T = Time to expiry (in years)
B-S = Black-Scholes Call option premium

$35.00
$35.00

$37.50
$40.00

5.0%
5.0%

20.0%
20.0%

18-Mar-05
18-Mar-05

-8.35
-8.35

#NUM!
#NUM!

$0.45
$0.13

Actual = Actual premium (You stick these into column H)

$35.00

$42.50

5.0%

20.0%

18-Mar-05

-8.35

#NUM!

$0.10

Stick a bunch of numbers in for S, K, Rf, V and Expiry

= S*NORMSDIST((LN(S/K)+(Rf+V^2/2)*T)/(V*SQRT(T))) - K*EXP(-Rf*T)*NORMS

Change them to see the effect on Black-Scholes

S=$35.00 Rf=5% V=20% T=-3046 days

Black-Scholes versus Strike Price
$18.00
$16.00

Compare to Actual premiums obtained here:

http://finance.yahoo.com/q/op?s=G

Actual premium

S=$35.00 Rf=5% V=20% T=-3046 days

$14.00
$12.00
$10.00
$8.00
$6.00
$4.00
$2.00
$42.50

$40.00

$37.50

$35.00

$32.50

$30.00

$27.50

$25.00

$22.50

$20.00

$0.00

ack-Scholes Call option premium

DIST((LN(S/K)+(Rf+V^2/2)*T)/(V*SQRT(T))) - K*EXP(-Rf*T)*NORMSDIST((LN(S/K)+(Rf+V^2/2)*T)/(V*SQRT(T))-V*SQRT(T))

Actual premium (You stick these into column H)

unch of numbers in for S, K, Rf, V and Expiry

them to see the effect on Black-Scholes

e to Actual premiums obtained here:

http://finance.yahoo.com/q/op?s=GE