Using Functions with a Black-Scholes Model

This Quantrix model can be used to determine option values using the Black-Scholes Model. The model also uses built in Quantrix functions to present a sensitivity analysis where ranges of variables are simulated so that sensitivity of option values and time premiums can be evaluated.

In 1973, Fischer Black and Myron Scholes created the analytic model that would determine the fair market value for European-type call options on non-payout assets. From the moment of its publication, the Black and Scholes Option Pricing Model became one of the most widely accepted of all financial models. The following built-in Quantrix functions are used to create this analysis.

LN - Natural (base e) logarithm of number. Function ln() is the inverse of function exp().
NORMDIST - Normal cumulative distribution for the specified mean and standard deviation.
EXP - Raises Euler's number (e) to the specified power

This Quantrix model can be used to determine option values using the Black-Scholes Model. The model also presents sensitivity analysis where ranges of the variables are simulated so that sensitivity of option values and time premiums can be evaluated. This model file has an interesting use of Views. There is a main Pricing Calculation Matrix that processes all of the calculations, from which 5 views are generated from this matrix to highlight the pricing and sensitivity analysis of the model. The entire matrix is being calculated by 16 plain-English formulas.

Downloads:

>> Black Scholes Model

Information for this Modeler note was found on internet publications by Kevin Rubash and a Black Scholes spreadsheet model published by the Mcgraw Hill On-line Learning Center.