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Understanding N(d1) and N(d2): risk-adjusted probabilities in the black-scholes model1
Author: Nielsen, Lars Tyge INSEAD Area: Finance Series: Working Paper ; 92/71/FIN Publisher: Fontainebleau : INSEAD, 1992.Language: EnglishDescription: 16 p.Type of document: INSEAD Working PaperAbstract: This paper uses risk-adjusted lognormal probabilities to derive the Black-Scholes formula and explain the factors N(d1) and N(d2). It also shows how the one-period and multi-period binomial option pricing formulas can be restated so that they involve analogues of N(d1) and N(d2) which have the same interpretation as in the Black-Scholes model| Item type | Current location | Collection | Call number | Status | Date due | Barcode | Item holds |
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Europe Campus Archives | Available | BC001000 |
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This paper uses risk-adjusted lognormal probabilities to derive the Black-Scholes formula and explain the factors N(d1) and N(d2). It also shows how the one-period and multi-period binomial option pricing formulas can be restated so that they involve analogues of N(d1) and N(d2) which have the same interpretation as in the Black-Scholes model
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