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Contents
Introduction
Valuation Inputs
Valuation Outputs
Implied Volatility
This sheet
Input area for Black-Scholes Option Premia and "Greeks" Calculator
Results sheet for Black-Scholes Option Premia and "Greeks" Calculator
Calculate Implied Volatility Using Excel's Goal Seek and Put/Call Premia
Directions
This workbook contains two functional sections, "Valuation" and "Implied Volatility," described below.
Valuation -- Calculate Option Premia and Other "Greeks" using Black-Scholes Model
This spreadsheet uses the Black-Scholes option pricing formula to value European calls
and puts. To value an option, enter the following information in the gray cells:
Unadjusted stock price: the current stock price.
Annual dividend yield: the expected annual dividend as a percentage of current stock price.
(For European options on stocks paying discrete dividends,
enter as the "unadjusted stock price" the current stock price less the present value
of the certain discrete dividends to be paid over the life of the option, and leave the
"dividend yield" cell equal to zero. However, the "Greeks" will not be calculated
correctly in this situation.)
Exercise price: the strike or exercise price of the option
Risk-free rate: the yield on a zero-coupon instrument with a maturity equal to the
maturity of the option. Specify the compounding frequency assumed by this interest rate.
Time to expiration (years): the time until the option expires, in years. You can use
the box underneath the primary input area to convert a start and end date into a
maturity in years.
Volatility: the volatility of the underlying stock, expressed on an annualized basis.
The model will display the adjusted stock price (the current stock price adjusted for the
effect of dividends), the option premium, delta, gamma, rho, theta, and vega, as well as
the intermediate calculations of d1, d2, and N(d1). For explanations of these variables,
see John C. Hull, Introduction to Futures & Options Markets (NJ: Prentice-Hall, 1995), ch.
11, 14.
Implied Volatility -- Calculate Implied Volatility using Black-Scholes Model
This spreadsheet uses the Black-Scholes option pricing formula to calculate the implied
volatility of an underlying stock based on the market valuation of European calls or puts
on the stock. Enter the same information as for the "Valuation" spreadsheet, except
instead of entering volatility, enter either the call or the put premium. Then click the
appropriate button on the right side of the screen, and the model will calculate the
implied volatility based on your inputs.
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INTRODUCTION
Calculator inputs
VALUATION
INPUTS
Stock price $
100.00
European style
5.00%
Call
Put
95.238
Option premium $
11.582
Exercise price $
100.00
Option delta
0.5925
-0.3599
7.253
10.00%
Compounding interval
1.00
Option rho
47.67
-43.24
Volatility (annualized)
25.0%
Option theta
-6.18
-2.16
0.0145
d1
0.3111
Vega
36.1999
d2
0.0611
N'(d1)
0.3801
01/01/95
End Date
12/31/95
Years
1.00
E41:
Use this box to calculate the time to expiration, then enter the result above.
F15:
F17:
The dividend yield calculated as annual dividends paid divided by current share price.
F19:
The stock price adjusted for any dividends that are expected to be paid between now and the maturity of the option.
F21:
Also called the Strike Price, this is the share price at which the holder of an option is able to buy (with a call) or to sell (with a put)
the underlying security.
F23:
F27:
F29:
H19:
The "fair value" price of the option, as calculated by the model, given the assumptions.
H21:
The change in option value (in dollars) when the stock price increases by $1
H27:
The change in option value (in cents) when interest rates increase by 1%
H29:
H33:
How much the option delta changes when the stock price increases by $1.
H35:
The change in option value (in cents) when volatility increases by 1%.
J33:
An intermediate calculation.
J35:
An intermediate calculation.
J37:
An intermediate calculation.
IMPLIED
VOLATILITY
Calculator inputs
Stock price
$100.00
10.00%
$11.73
Risk-free rate
10.00%
Compounding frequency
$82.64
$7.10
2.00
24.6%
0.2007
d2
-0.1466
Call premium
$11.73
Put Premium
$10.96
G15:
G19:
G21:
G36:
An intermediate calculation.
I32:
The implied volatility is the annualized volatility that matches the Black-Scholes "fair value" price with the observed price
offered by the market.
K15:
The stock price adjusted for any dividends that are expected to be paid between now and the maturity of the option.
K17:
Also called the Strike Price, this is the share price at which the holder of an option is able to buy (with a call) or to sell (with a
put) the underlying security.
K19:
K23:
K36:
An intermediate calculation.
sample1
Page 7
sample1
100
0.05
100
11.73
7.1
0.1
Page 8