Wall Street Math made Easy: Understanding Black-Scholes and option pricing by ARJUN SUD

Author:ARJUN SUD [SUD, ARJUN]
Language: eng
Format: azw3
Publisher: Arjun Sud
Published: 2014-04-01T04:00:00+00:00

Step 4:

Label Column B as “Day 0”. This will be starting price of the stock on Day 0. Under the column, refer to the stock price in the “input” tab. The formula will be “=Inputs!$B$2”. Drag this formula down so that all the 1,000 simulations use this as the Day 0 value

Step 5:

Label column C as “Interest earned”. This will be the risk free interest that one would earn on $100 in one day. This is the “ “portion of equation (2), and is given by the formula “B2*(1+Inputs!$B$3)*(1/365)”. Drag to all 1,000 rows.

Please note that this does not mean that someone holding a stock earns interest. This is simply stating that every asset that we hold becomes a little bit more expensive each day (present and future value of money).

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