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  1. S

    Normal IV vs. Log-normal IV

    Hi All, Anyone has any idea/thoughts around how we can convert Log-normal Implied Volatility(Black Scholes) to Normal Implied Volatility?
  2. Nicole Seaman

    YouTube T4-10: Lognormal property of stock prices assumed by Black-Scholes

    Although the Black-Scholes option pricing model makes several assumptions, the most important is the first assumption that stock prices follow a lognormal distribution (and that volatility is constant). Specifically, the model assumes that log RETURNS (aka, continuously compounded returns) are...
  3. David Harper CFA FRM

    P1.T4.815. Black Scholes value of a warrant and implied volatility (Hull Ch.15)

    Learning objectives: Compute the value of a European option using the Black-Scholes-Merton model on a non-dividend-paying stock. Compute the value of a warrant and identify the complications involving the valuation of warrants. Define implied volatilities and describe how to compute implied...
  4. N

    PQ-external BS model assumptions:

    Hi, Mr. Harper, again is me. :) The following question is about BS model: It ask "Which is an assumption of BSM model....." But I have checked the notes of book 1, none of them is an assumption of BSM model, am I right?:D
  5. Nicole Seaman

    P1.T4.413. Black-Scholes

    Concept: These on-line quiz questions are not specifically linked to AIMs, but are instead based on recent sample questions. The difficulty level is a notch, or two notches, easier than bionicturtle.com's typical AIM-by-AIM question such that the intended difficulty level is nearer to an actual...
  6. sleepybird

    Understanding the relationship between Merton Probability of Default (PD) and the Black-Scholes Mode

    Below I am trying to show the relationship between Merton PD and the BSM. Merton PD = N[ -[ln(V/K)+(μ-0.5σ²)T]/σT ] The formula inside the bracket (let’s name it D2 since it) is very similar to the formula for d2 in the BSM for pricing call option: d2 = ln(S/X)+(r-0.5σ²)T]/σT So we have...