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Black scholes model

Final 701 views 5 replies

How to find Nd1 and Nd2

D1 is 0.5850

D2 is 0.2992

Given in ques:

Number of S.D from mean    Area of left or right

             0.25                                   0.4013

             0.30                                   0.3821

             0.55                                   0.2912

             0.60                                   0.2743

 

Replies (5)
Hi,
in this particular sum they have done it through interpolation.

Step
1) The area to the left or right needs to be used to get the area under the curve.
Meaning the area corressponding to 0.25 would be 1 - 0.4013 = 0.5987
Similarly for 0.30 it would be 0.6179

Now using 0.25 and 0.30 with the above values interpolate for 0.2992

Similarly for nd1.

general method taught in class in something else but here the data is given in such a way that we have to use interpolation.

Hey thank you so much

Also the area under the curve would be calculated accordingly if its ine tail two tail etc. and then followed by interpolation.

In a two tail the area should be divided by 2 and the above method follows..am I correct?

yepp..two tail is nothing but one tail * 2.. so yeah ur right


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