Black-Scholes Option Price Calculation--Help Page

This Javascript activated table computes the value of an option, using the Black-Scholes method.

Click inside the field "Equity Price" to begin entering data.
You use the Tab key or mouse to select each successive item to be entered.
When all fields have been filled except Option Value, click the "Do-It" button.
The underlying Javascript will calculate the value of the option.

The equations governing the computation are shown.
C is the value of the option, the number we are calculating.
S is the price of the underlying Stock or commodity which the option covers.
L is the Strike price, the price at which the option owner can buy stock when the option matures.
is the volatility of the stock, technically the variance parameter of a normal distribution, per year.
The parameter r, rate per year, is the annualized rate of return for a risk free portfolio.
Term is the period of time in decimal fractions of a year measured from the valuation of the option (normally today) to the date by which the option can potentially be exercised.

The function norm(d) is an approximation of the standard normal function. The function N() which is used in the Black-Scholes formula as shown in the illustration is the standard normal cumulative distribution with a mean of 0 and a variance of 1. Since the standard normal function is not available in Javascript, an approximation formula was used. The approximation is accurate to within 1% of the Excel values for NORMSDIST(x) throughout the entire range.

You should compare numerical results from this model against others that are available on the net.
Using the pop down list of links, under References, you can download any of the models and use them to calculate options.
Since the calculation is in Javascript, the sourcecode for the program can be read using your browser.
Click on View and then on Page Source.

I personally would want to examine the source code for any model of this sort before applying it. Java models that do not provide a copy of sourcecode are unfortunate in this regard. If the author does provide sourcecode, the applets are only safe if they can be recompiled.

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