Rho (put) formula has the following : N(-d2), however cummulative Z-table is only for positive #'s? Thank you,
Hi Glen But (and GARP does likes to test this) the normal is symmetrical such that N(-d2) = 1-N(d2).Or, N(-z) = 1 - N(z). For example, say you want N(-1.645) which is area under curve to the left of -1.645 deviates. That's the left tail, which by symmetry, is the same area as its "matching" right tail, to the right of + 1.645. We know the area to the left of + 1.645? This is the definition of CDF. It is N(1.645), such that to the right of +1.645 must be 1-N(1.645); all probabilities have area = 1.0. As left tail area must match, N(-1.645) = 1 - N(1.645) = 1 - 95%. Thanks, David
