Black Scholes Calculator 
Sponsored Ads 
The calculator uses an adjusted BlackScholes model to value European options. (European options are those that can only be exercised at expiry).
The model is adjusted to take into account dividends paid on the underlying security. The calculator can in fact be used for: stock options, index options, currency options, options on futures. 
Find the value of a European call option using the BlackScholes formula



Input DefinitionsNote: as an aid for input, there is the facility to input the share/strike/option prices all as "eighth's". For this, select the button (to the right of the input strike price). With /8 selected, a price of 67 3/8 can be input as 67.3; the program will then automatically convert "67.3" to the decimal 67.375 for use in the calculations. All outputs from the calculator will always be expressed in decimal.
Note: if valuing currency options, then the foreign interest rate should be input to this field. Note: strictly, the BlackScholes valuation model requires the interest rate to be a continuously compounded rate. So the calculator converts the simple rate input, to a continuously compounded rate. However, some option calculators and examples in books do not make this adjustment, so there is the facility to "switch off" this conversion, by deselecting the button called ccint. This might then enable calibration with other option calculators.

Assumptions underlying the BlackScholes model 1) Constant volatility. The most significant assumption is that volatility, a measure of how much a stock can be expected to move in the nearterm, is a constant over time. While volatility can be relatively constant in very short term, it is never constant in longer term. Some advanced option valuation models substitute BlackSchole's constant volatility with stochasticprocess generated estimates. 2) Efficient markets. This assumption of the BlackScholes model suggests that people cannot consistently predict the direction of the market or an individual stock. The BlackScholes model assumes stocks move in a manner referred to as a random walk. Random walk means that at any given moment in time, the price of the underlying stock can go up or down with the same probability. The price of a stock in time t+1 is independent from the price in time t. 3) No dividends. Another assumption is that the underlying stock does not pay dividends during the option's life. In the real world, most companies pay dividends to their share holders. The basic BlackScholes model was later adjusted for dividends, so there is a workaround for this. This assumption relates to the basic BlackScholes formula. A common way of adjusting the BlackScholes model for dividends is to subtract the discounted value of a future dividend from the stock price. 4) Interest rates constant and known. The same like with the volatility, interest rates are also assumed to be constant in the BlackScholes model. The BlackScholes model uses the riskfree rate to represent this constant and known rate. In the real world, there is no such thing as a riskfree rate, but it is possible to use the U.S. Government Treasury Bills 30day rate since the U. S. government is deemed to be credible enough. However, these treasury rates can change in times of increased volatility. 5) Lognormally distributed returns. The BlackScholes model assumes that returns on the underlying stock are normally distributed. This assumption is reasonable in the real world. 6) Europeanstyle options. The BlackScholes model assumes Europeanstyle options which can only be exercised on the expiration date. Americanstyle options can be exercised at any time during the life of the option, making american options more valuable due to their greater flexibility. 7) No commissions and transaction costs. The BlackScholes model assumes that there are no fees for buying and selling options and stocks and no barriers to trading. 8) Liquidity. The BlackScholes model assumes that markets are perfectly liquid and it is possible to purchase or sell any amount of stock or options or their fractions at any given time. See the BlackScholes model page for more details about the BlackScholes model and to read about how these assumptions relate to realworld scenarios. 
Who was Fischer Black
Fischer Sheffey Black (January 11, 1938  August 30, 1995) was an American economist, best known as one of the authors of the famous BlackScholes equation. Black graduated from Harvard College in 1959 and received a Ph.D. in applied mathematics from Harvard University in 1964. He was initially expelled from the PhD program due to his inability to settle on a thesis topic, having switched from physics to mathematics, then to computers and artificial intelligence. Black joined the consultancy Bolt, Beranek and Newman, working on a system for artificial intelligence. He spent a summer developing his ideas at the RAND corporation. He became a student of MIT professor Marvin Minsky, and was later able to submit his research for completion of the Harvard PhD. n 1973, Black, along with Myron Scholes, published the paper 'The Pricing of Options and Corporate Liabilities' in 'The Journal of Political Economy'.[5] This was his most famous work and included the BlackScholes equation. In March 1976, Black proposed that human capital and business have "ups and downs that are largely unpredictable [...] because of basic uncertainty about what people will want in the future and about what the economy will be able to produce in the future. If future tastes and technology were known, profits and wages would grow smoothly and surely over time." A boom is a period when technology matches well with demand. A bust is a period of mismatch. This view made Black an early contributor to real business cycle theory. Who was Myron Scholes Myron Samuel Scholes (born July 1, 1941) is a Canadianborn American financial economist who is best known as one of the authors of the BlackScholes equation. In 1997 he was awarded the Nobel Memorial Prize in Economic Sciences for a method to determine the value of derivatives. The model provides a conceptual framework for valuing options, such as calls or puts, and is referred to as the BlackScholes model. 
Disclaimer: Results provided by BlackScholes.net are of a general nature. No liability will be accepted for the outcome. Copyright BlackScholes.net 2013.  Terms of Use    Privacy Policy 