1. G

    BSM Model d1 and d2 and finding applicable z score

    I have two questions concerning d1 and d2 as inputs to the BSM model. 1. I have read in other sources that in the exam you will not likely be asked to calculate d1 and d2 but instead be provided with these as inputs for the BSM calculation. That said you will need to look up the applicable z...
  2. Nicole Seaman

    YouTube T4-12: How to interpret N(d1) and N(d2) in Black Scholes Merton

    N(d1) is the option's delta and N(d2) is the probability that a call option will be exercised; that is, N(d2) is the probability that S(T) will be greater than K. David's XLS is here: https://trtl.bz/2E8qsmw
  3. Nicole Seaman

    FAQ Exam Will the exam always provide N(d1) and N(d2) or do we need to know how to calculate them? (Are formula sheets provided? Answer: No)

    Question: The BSM formula is actually simple except for N(d1) and N(d2) in the case of the call, and N(-d1) and N(-d2) in the case of the put. Will the exam always provide N(d1) and N(d2) or do we need to know how to calculate them? Answer: That's a good point that BSM is simple except for the...
  4. G

    Will the exam provide N(d1) and N(d2) or do we need to calculate them?

    In reference to R27.P1.T4.Hull_Ch13_15_19:Topic: BLACK-SCHOLES-MERTON_MODEL :- In the exam, if we were to calculate the Call or Put Option prices using the BSM Model, would it be safe to assume that N(d1) & N(d2) would ALWAYS be provided given....? There are formulae to calculate the d1 and...
  5. F

    N(d1) and N(d2) in Merton Model

    Could some one explain to me how the N(d1) and N(d2) is computed in this question below? Let firm value (V) equal $1 billion with face value of debt (F) equal to $800 million. The debt is zero-coupon and matures in four years (T = 4.0). The riskless rate is 5.0%. The estimate of the volatility...
  6. C

    Q37.3.4 - where do d1 and d2 values come from?

    in the solution it says, "since d1=1.25786...." Where do the d1 and d2 values come from? are they calculated using the formulas for d1 (page 54 of notes) and d2, and if so, what is the likelihood that is testable?
  7. H

    Black-Schoes d1 and d2 calculation

    Hello David, For the FRM exam, is it usually the case that we will be tested on the calculation of d1 and d2? Thanks!
  8. S

    Interpretation of N(d1) and N(d2)

    David: Is there is a straightforward "English language" interpretation for the BSM-related probabilities N(d1) and N(d2) -- for example, since N(d1) seems to be "linked" to S (current stock price) and N(d2) to the PV of the strike price, is there a simple way to understand the meaning of...