Black-Scholes N(-d1) & N(-d2)

[SamuelMartin]

ok, I always seen in all the exercises that when calculation the price of a Put to convert the d1 into -d1 you need to do --> -d1 = 1 - d1

However, I don't know in the following exercise solution, where the -d1 & -d2 figures are coming from.

Any help would be highly appreciated.

Thanks!!!!!

QUESTION IS IN THE PICTURE ATTACHED.

 

[ShaktiRathore]

Hi,
We do the conversion -d1=1-d1 only for N(d1) so that if we know N(d1) then we can find N(-d1)=1-N(d1).for normal dist. U know that for any vatiable x N(-x)=1-N(x) as its symmetrical.doont confuse as -d1 and- d2 shall have same magnitude as d1 and d2 only their signs shall change there is no identity as -d1=1-d1 its useful in conjunction of N(d).
Thanks

 

[SamuelMartin]

So the explanation of the exercise and the result is wrong?

That's what I thought N(-d1)=1-N(d1) and how I always calculated but the answer of the exercise confused me.

Thanks

 

[David Harper CFA FRM]

Hi @SamuelMartin The explanation looks correct to me. I don't see it showing N(d1) or N(d2). It computes d1 = 0.2417 and d2 = 0.0917, then it just negates the d1 and d2: N(-d2) = N(-0.0917) = 0.4634 and N(-d1) = N(-0.2417) = 0.4045.

I wonder if you are focused (as I am) on N(-d1) = 1 - N(d1) because you'd need most likely to use this on the exam, but the answer does not show it that way. What I mean is, the Z lookup table is typically provided only for the positive Z values (the right side of the distribution). So, in this problem, you'd need d1 = 0.2417 to retrieve N(d1) = 0.595, which is based on a rounded N(0.24). Then you'd get N(-d1) = 1 - N(d1) = 1-0.595 = 0.405 ... because with a hardcopy lookup table you probably wouldn't be able to retrieve N(-0.2417) directly. I hope that's helpful, thanks,

 

[JFZ2014]

Hi, a side question: where is the BS model spreadsheet? I would like to study it and saw a video on it saying that it is here.
Many thanks!

 

[Nicole Seaman]

Hello @JFZ2014,

The spreadsheet that you are looking for is in this spreadsheet bundle: https://learn.bionicturtle.com/frm-...rials/learning-spreadsheet-p1.t4.b-xls-bundle.

All of the other spreadsheet bundles for this topic are located under the Topic Review.

Thanks!

Nicole

 

[JFZ2014]

Thanks Nicole. I clicked on the link and was directed to:
You must Purchase or Upgrade your subscription to access this resource.
Could you check if I have purchased or subscribed? Thanks. I thought I did. If not, please let me know. Thanks.

 

[SamuelMartin]

Hi @SamuelMartin The explanation looks correct to me. I don't see it showing N(d1) or N(d2). It computes d1 = 0.2417 and d2 = 0.0917, then it just negates the d1 and d2: N(-d2) = N(-0.0917) = 0.4634 and N(-d1) = N(-0.2417) = 0.4045.

I wonder if you are focused (as I am) on N(-d1) = 1 - N(d1) because you'd need most likely to use this on the exam, but the answer does not show it that way. What I mean is, the Z lookup table is typically provided only for the positive Z values (the right side of the distribution). So, in this problem, you'd need d1 = 0.2417 to retrieve N(d1) = 0.595, which is based on a rounded N(0.24). Then you'd get N(-d1) = 1 - N(d1) = 1-0.595 = 0.405 ... because with a hardcopy lookup table you probably wouldn't be able to retrieve N(-0.2417) directly. I hope that's helpful, thanks,

David,, you are awesome. You provide me with the answer I was looking for. I understand now. I was doing 1 - 0.09 = 0.93 so I was obviously wrong.

Thanks again

 

[Nicole Seaman]

Hello

Thanks Nicole. I clicked on the link and was directed to:
You must Purchase or Upgrade your subscription to access this resource.
Could you check if I have purchased or subscribed? Thanks. I thought I did. If not, please let me know. Thanks.

@JFZ2014,

I checked your account, and you purchased the Basic package. In order to access the spreadsheets, you need to be subscribed to the Professional package. If you are interested in upgrading, we do offer upgrades for the difference in price between the packages.

Thank you,

Nicole

 

[NadiaSayyam]

hi Nicole,
i cannot see any spread sheets related to Black scholes model and binomial model in study planner. As I am using the professional package can you please help me out.

thanks Nadia

 

[Nicole Seaman]

Hello @NadiaSayyam

Make sure to check for spreadsheet bundles under the Topic Review section of each topic in the study planner. You will find the spreadsheets associated with the Black Scholes Model under the Topic 4 Review section.