Description

Consider oGBS( ) Example 1 which values a European call option on a stock that has a current spot price of $100.00, a volatility of 30% and pays no dividends. The call option has a strike price of $100.00 and matures on 1 September 2003. In that example d1 was calculated as 0.34423 and N(d1) was given as 0.63466. Let's see how N(d1) was determined:

Solution

As d1 = 0.34423 > 0 the numerical approximation for N(x) is:

While n(d1) and k are:

Thus the cumulative normal distribution for d1 = 0.34423 is calculated as: