OPTION WORKSHEET: SHORT TERM OPTIONS VALUING A SHORT-TERM OPTION - WITH DIVIDEND ADJUSTMENT This program calculates the value of a short-term option (< 1 year) adjusting for dividends by subtracting the present value of expected dividend from the current value of the asset. Assumptions 1. All the assumptions underlying the Black-Scholes model apply. 2.The amount of the dividend and the ex dividend date are known. The user has to input the following variables: 1. Current market value of the underlying asset 2. Variance in the ln(value) of the underlying asset 3. Strike price of the option 4. Riskless interest rate that corresponds to the life of the option 5. Time to expiration on the option 6. Expected dividends and date of ex dividend payments. Inputs Relating to the Underlying Asset Enter the current market value of the underlying asset $22.75 (in currency) Enter the standard deviation in ln(market value) of the underlying asset 28.00% (in %) Are any dividends expected during the option's lifetime? no (Yes or No) If yes, enter the number of dividends expected (in #) (Maximum=4) Enter the expected value and time for each dividend payment. Dividend # Expected $ Time until DPS payment (in days) 0 $0.00 0 0 0 0 Inputs on the option Enter the strike price of the option $25.00 (in currency) Enter the time to expiration on the option (in days) 182.5 (in days) General Inputs Enter the annualized riskless rate corresponding to option lifetime 4.50% (in %) VALUING A LISTED OPTION Stock Price = $22.75 Interest Rate = 4.50% Strike Price = $25.00 Variance = 0.0784 Expiration (as fraction of yr) = 0.5 PV of Expected Dividend = $0.00 d1 = -0.26370375 N(d1) = 0.3960041 This is the option delta. d2 = -0.46169365 N(d2) = 0.32215051 Value of the call = $1.13 Value of the put = Call - Stock Price + K e (-rt) = $2.83 Note: Spreadsheet developed by Aswath Damodaran; available at http://pages.stern.nyu.edu/~adamodar/.
Pages to are hidden for
"All the assumptions underlying the Black Scholes model apply"Please download to view full document