CCI Online Learning
What do you want to learn today?
     
CIBIL

Share on Facebook

Share on Twitter

Share on LinkedIn

Share on Email

Share More

Black and schole model


Dhanashre (Costing)     24 September 2012

Dhanashre
Costing 
 1 likes  181 points

| My Other Post

Dear All,

Please guide how to calculate the value of N(d1) in following example -
 

Number of S.D. from Mean,                    (z) Area of the left or right (one tail)
0.25 0.4013
0.3 0.3821
0.55 0.2912
0.6 0.2578


Price of stock now = Rs.80
Exercise price = Rs.75
Standard deviation of continuously compounded annual
return = 0.40
Maturity period = 6 months
Annual interest rate = 12%

d1 = 0.5187
 How to calculate value of N(d1) ?

avater

Ravitej T (Associate)     25 September 2012

Ravitej T
Associate 
 8 likes  96 points

View Profile | My Other Post

N(d1)=.74

Dhanashre (Costing)     25 September 2012

Dhanashre
Costing 
 1 likes  181 points

View Profile | My Other Post

How to find out this value

avater

john_laphadi (Accounts-Executive)     25 September 2012

john_laphadi
Accounts-Executive 
 25 likes  196 points

View Profile | My Other Post

To Dhanshree ,

    i would like to give few info. on this question before  further solving :-

1 . This question is already asked in CWA- JUNE 2007 for 8 marks.

2.  ur info in above question is wrong realted to Z Area of  0.6 . The correct proability i.e 0.6 = 0.2743

3.  ur d1 value is also wrong . The correct value of d1 after solving is d1 = 0.58168.

calculation of  N(d1)  = N(.58168) = ?

answer shown below :-

given table value for (Z = 0.55) = .2912    

                                     (Z = 0.60) = .2743

N(0.55) = 1- 0.2912 = .7088 (Refer explanation no. 1)

N(0.60) = 1- 0.2743 = .7257 (Refer explanation no. 1)

Explanation No. 1

as we know that total probability of table is 1 & in "one tail table" if z = +ve then it shows right side area probability of calculated  Z (use right tail table).

now use interpolation technique in figures given below :-

.55       = 0.7088

.58168 = ?

.60        = .07257

from calculation using interpolation technique ,

we got value of N(d1) i.e. N(.58168) = 0.7195.

so , Dhanshree ur query has been solved out .. hope that further part of question will be done by your self ..

 

Thanks

J_Laphadi

 

 

2 Like

Dhanashre (Costing)     27 September 2012

Dhanashre
Costing 
 1 likes  181 points

View Profile | My Other Post

Please explain using interpolation technique. Thanx in advance.


(Guest)

Ist Method

Solving by intrapolation method for above problem: As shown by Mr Lapadi

.55 = 0.7088

0.60 = 0.7257

0.5817= ?

By Intrapolation:

[(0.5817-0.5500) / (0.60 - 0.55)] X [0.7257 - 0.7088]

= [0.0317/0.05] X 0.0169

= 0.0107146

Hence N(.5817) = 0.7088 + 0.0107146 = 0.7195. This is the same as Mr  Laphadi has shown

IInd Method : Or you can use the table

d1 = 0.5817. See the table for 0.5 under 8 and that is equal to  0.7190.

Then 0.17 x (0.7224-0.7190) = 0.000578    ( Note: 0.7224 is the value in table after 0.7190)

Then Add 0.7190 + 0.000578 and you get 0.7195.

 

Regards

John John

 

avater

Paramjeet Singh Gulati (Assistant)     28 September 2014

Paramjeet Singh Gulati
Assistant 
 1 likes  221 points

View Profile | My Other Post

Thanks Mr. J LAPHADI.... I searched the same query...now solved .

avater

rajat (Student)     27 February 2019

rajat
Student 
 22 points

View Profile | My Other Post

If two tail area was given then how to calculate nd1

avater

RAJA Potladurthi (Student CA final)     19 August 2019

RAJA Potladurthi
Student CA final 
 3 points

View Profile | My Other Post

Tqs sir...


Leave a reply

Your are not logged in . Please login to post replies

Click here to Login / Register  



Related Threads


Loading

Popular Discussion


view more »





Download the latest Question Papers for free

click here





Trending Tags
income tax
unified portal
tds
cag
gst council meeting
tin nsdl
ca
gstr 3b
Info Technology
epf
companies act 2013
Service Tax
pm cares fund
students
Union Budget
corporate law
dvat
exams
traces
mca