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Here is a brief preview of CFI’s Black Scholes calculator.
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Option Pricing
CFI’s Black Scholes calculator uses the Black-Scholes option pricing method. Other option pricing methods include the binomial option pricing model and the Monte-Carlo simulation.
The Black-Scholes option pricing method focuses purely on European options on stocks. European options, which can only be exercised on the expiry date of the option. American options, which can be exercised early, cannot be priced using the Black-Scholes option pricing method.
Using this method, the Black Scholes calculator makes a few assumptions that you will need to remember:
The main variables calculated and used in the Black Scholes calculator are:
Stock Price (S): the price of the underlying asset or stock
Strike Price (K): the exercise price of the option
Time to Maturity (t): the time in years until the exercise/maturity date of the option
Risk-free Rate (r): the risk-free interest rate
Volatility (σ): the measure of how much the underlying asset’s prices will move over time. This calculator uses annualized volatility
Additional Resources
Thank you for reading CFI’s guide on Black Scholes Calculator. Check out our business templates library to download numerous free Excel modeling, PowerPoint presentation, and Word document templates.
CFI is a global provider of financial modeling courses and of the FMVA Certification. CFI’s mission is to help all professionals improve their technical skills. If you are a student or looking for a career change, the CFI website has many free resources to help you jumpstart your Career in Finance. If you are seeking to improve your technical skills, check out some of our most popular courses. Below are some additional resources for you to further explore:
CFI is a global provider of financial modeling courses and of the FMVA Certification. CFI’s mission is to help all professionals improve their technical skills. If you are a student or looking for a career change, the CFI website has many free resources to help you jumpstart your Career in Finance. If you are seeking to improve your technical skills, check out some of our most popular courses. Below are some additional resources for you to further explore:
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