How to determine Black-Scholes current Rate number?

Discussion in 'Options' started by Wait4proof, Jul 10, 2013.

  1. sle

    sle

    You don't need to use Black-Scholes for that - just calculate your projected P&L based on greeks.
     
    #11     Jul 10, 2013
  2. kapw7

    kapw7

    #12     Jul 10, 2013
  3. Maybe you are looking at it wrong. Firstly, I'd just use a fixed rate. Just use LIBOR or treasuries. Next, you don't know what the volatility is until you calc it. With B-S you have to iterate, changing the Vol input until you get the option price being quoted. Then that Vol value is the current IV for that option.

    Then use that IV value to calc the option value on the day you are concerned about, and at the underlying price. I graph daily and weekly option values at every percent, + and -, of different underlying price ranges and with + and - changes in IV. That way it is easy to see what happens if the stock goes up and down, or IV changes, etc.

    These kinds of calcs should be plenty good enough for "what if" speculation. At least they have been for me, for a long time.
     
    #13     Jul 10, 2013
  4. Eyez

    Eyez

    why don't you just take the top of the book quotes and then figure out the rate from that to get an idea of what rate is being used??
     
    #14     Jul 11, 2013
  5. Yeah, looks like OP is confounding a few things here...

    The right rate to use is the funding rate, whatever it might be, in your particular case (not that it matters that much, but anyways).
     
    #15     Jul 11, 2013
  6. stoic

    stoic


    The Greeks are voodoo as well !
     
    #16     Jul 11, 2013
  7. sle

    sle

     
    #17     Jul 11, 2013