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oBLACK( ) Model Definition

Black's model for pricing options on futures and forwards is as follows:

Equation Template

Equation Template

Equation Template

 

OV = option value.

F = forward price of the underlying asset with a maturity equal to the option's maturity date.

X = exercise price (strike).

r = risk-free interest rate, expressed with continuous compounding.

vol = volatility of the relative price change of the underlying asset.

T = time to maturity measured in years (actual/365 basis).

N(.) = cumulative normal distribution of (.).

iPC = 1 for call / -1 for put.

 

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