30 Pages Posted: 7 Apr 2008
Date Written: April 3, 2008
I show: a) how to use the Black and Scholes formula to value options; b) what is the arbitrage portfolio; c) how to calculate the volatility; d) how the early exercise affects the value of the option; and e) how the dividends affect the value of the option; and f) what is the implicit volatility.
Keywords: Black and Scholes, volatility, arbitrage, early exercise, put, call
JEL Classification: G12, G31, M21
Suggested Citation: Suggested Citation