Valuation of a European put option (Black & Scholes model) formula
Description of the Valuation of a European put option (Black & Scholes model) formula
Formula for the evaluation of a European put option on an underlying which does not pay dividends before the expiry of the option, using the Black & Scholes model
Formula
\[ p(s,t) = -SN(-d1) + Ke^{-rt}N(-d2) \] \[
{\small
where: d1 = \frac{ln \left( \frac{S}{K} \right ) + \left(r+\frac{\sigma^{2}}{2}\right)t}{\sigma\sqrt{t}} } ; \] \[ {\small d2 = d1 - \sigma \sqrt{t} } \ \]
Symbols
\(K\ \)
Option strike price
\(N\ \)
Standard normal cumulative distribution function
\(r\ \)
\(σ\ \)
Volatility of the underlying
\(S\ \)
Price of the underlying
\(t\ \)
Time to option's expiry
Additional information related to this formula
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