OPTIONS Black-Scholes

This calculator uses the Black-Scholes option pricing model to compute the theoretical value and greeks of European-style call and put options. To generate results, enter the Inputs and click Calculate.

The OptionsBS function in FinTools XL utilizes the Black-Scholes model to calculate the theoretical price and risk sensitivities of European options.

Model: The variant of the Black-Scholes model to use.

• European model: This model assumes that the option can only be exercised at expiration, not before.
• Quasi-American model: This model is particularly useful for underlying assets that yield discrete cash flows, such as dividend-paying equities. It allows the option holder to exercise the option early, but only at specific dates.

Underlying Price: The current price of the underlying asset.

Exercise Price: The price at which the asset can be bought (call) or sold (put) at.

Time: The time to expiration of the option, expressed in years, between the Value Date and the Expiration Date.

Interest Rate: The risk-free interest rate.

Yield Rate: The annual dividend yield expressed as a percentage of the underlying asset price.

Volatility: The annualized volatility of the underlying asset's returns, expressed as a decimal.

MarketOptionPrice: The traded price of the option in the market for calculating Implied Volatility.

Each of these inputs plays a crucial role in determining the output of the OptionsBS function, whether that be the theoretical price of the option or one of its Greek sensitivities. This model assumes that the price changes of the underlying asset are log-normally distributed and that there are no arbitrage opportunities.