Anda di halaman 1dari 8

HBS Toolkit

HBS Toolkit License Agreement


Harvard Business School Publishing (the Publisher) grants you, the
individual user, limited license to use this product. By accepting and
using this product, you agree to the terms of service described below.
Terms
You accept that this product is intended for your use, and you will not
duplicate in any form or manner, electronic or otherwise, copies of this
product nor distribute this product to anyone else.
You recognize that the product and its content are the sole property of the
Publisher, and that we have copyrighted the product.
You agree that the Publisher is not responsible for any interruption of
service or malfunction that is a consequence of the Internet, a service
provider, personal computer, browser or other software or hardware
components. You accept that there is no guarantee that this product is
totally error free. You further understand and accept that the Publisher
intends to provide reliable information but does not guarantee the accuracy
or completeness of any information, and is not responsible for any results
obtained from the use of such information.
This license is effective until terminated, when the license or subscription
period ends without renewal, or when you destroy this product and any
related documentation. The Publisher may terminate your license without
notice if you fail to comply with the conditions set forth in this
agreement, and may pursue any other legal recourse.

Copyright 1999 President and Fellows of Harvard College

LICENSE AGREEMENT

Black-Scholes Option Calculator

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.

Note About Using Internet Explorer


The default setting in Internet Explorer is to open these tools in the Explorer application
instead of Excel. We recommend against this and provide directions in the Help section
of the HBS Toolkit web site to change this default behavior.

HBS Menu
Show/Hide Sample Data:
Show Calculator:
Show/Hide Celltips:
Print Sheet with Celltips:
Set Zoom:
Visit Web Links:
About HBS Toolkit:

Launches Windows calculator


Toggles in/out red Celltips in documented cells
Prints Celltip documentation on current sheet
Provides quick access to 80%, 100%, and 125% zoom levels
Links to HBS Toolkit website, Toolkit Glossary, and Toolkit
Feedback, as well as HBS and HBS Publishing web sites
Launches the about box for the HBS Toolkit

Harvard Business School, Case Software 2-296-704


This worksheet was prepared by Professor Peter Tufano and Research Associate Cameron
Poetzscher as the basis for class discussion rather than to illustrate either effective or ineffective
handling of an administrative situation.
Copyright 1996, 1999 President and Fellows of Harvard College

INTRODUCTION

Black Scholes Option Calculator

Calculator inputs

VALUATION
INPUTS

Black Scholes Calculations

Stock price $

100.00

Annual Dividend Yield (D/P)

European style

5.00%

Call

Put

Adjusted stock price $

95.238

Option premium $

11.582

Exercise price $

100.00

Option delta

0.5925

-0.3599

Risk Free Rate

7.253

10.00%

Compounding interval

Time to expiration (years)

1.00

Option rho

47.67

-43.24

Volatility (annualized)

25.0%

Option theta

-6.18

-2.16

For Call or Put


Gamma

0.0145

d1

0.3111

Vega

36.1999

d2

0.0611

N'(d1)

0.3801

Time to expiration calculator


Start Date

01/01/95

End Date

12/31/95

Years

1.00

Copyright 1996, 1999 President and Fellows of Harvard College

E41:

Use this box to calculate the time to expiration, then enter the result above.

F15:

The current price of the stock.

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:

Enter interest rate with periodic compounding.


The equivalent continuously compounded interest rate will be used in the subsequent calculations.

F27:

The number of years until the option expires or matures.

F29:

Annualized standard deviation of stock price returns.

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:

The change in option value when time to expiration decreasesby 1 year.

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.

Black Scholes Option Calculator

IMPLIED
VOLATILITY

Calculator inputs
Stock price

$100.00

Annual Dividend Yield (D/P)

10.00%

Market price of call

$11.73

Risk-free rate

10.00%

Compounding frequency

Implied Volatility (Sigma)

Adjusted stock price

$82.64

Exercise price $ 100.00


Market price of put

$7.10

Time to expiration (years)

2.00

24.6%

Intermediate Solver Calculations


d1

0.2007

d2

-0.1466

Call premium

$11.73

Put Premium

$10.96

Copyright 1996, 1999 President and Fellows of Harvard College

G15:

The current price of the stock.

G19:

This is the price of the call as quoted in the market.

G21:

Enter interest rate with periodic compounding.


The equivalent continuously compounded interest rate will be used in the subsequent calculations.

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:

This is the price of the put as quoted in the market.

K23:

The number of years until the option expires or matures.

K36:

An intermediate calculation.

sample1

Page 7

sample1

100
0.05

100

11.73

7.1

0.1

Page 8