Microsoft Excel Approach to Estimating Alternative Option Pricing Models

Cheng-Few Lee, John Lee, Jow-Ran Chang and Tzu Tai
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Cheng-Few Lee: Rutgers University, Department of Finance
John Lee: Center for PBBEF Research
Jow-Ran Chang: National Tsing Hua University, Department of Quantitative Finance
Tzu Tai: Mezocliq, LLC

Chapter Chapter 26 in Essentials of Excel, Excel VBA, SAS and Minitab for Statistical and Financial Analyses, 2016, pp 835-860 from Springer

Abstract: Abstract This chapter shows how Microsoft Excel can be used to estimate call and put options for (a) Black–Scholes model for individual stock, (b) Black–Scholes model for stock indices, and (c) Black–Scholes model for currencies. In addition, we are going to present how an Excel program can be used to estimate American Options. Section 26.2 presents an option pricing model for Individual Stocks, Sect. 26.3 presents an option pricing model for Stock Indices, Sect. 26.4 presents option pricing model for Currencies, Sect. 26.5 presents Bivariate Normal Distribution Approach to calculate American Call Options, Sect. 26.6 presents the Black’s approximation method to calculate American Call Options, Sect. 26.7 presents how to evaluate American Call option when dividend yield is known, and Sect. 26.8 summarizes this chapter. Appendix 26.1 defines the Bivariate Normal probability density function, and Appendix 26.2 presents the Excel program to calculate the American call option when dividend payments are known.

Keywords: Bivariate normal distribution; Black’s model; Black–Scholes model; Currencies; Dividend yield; Future option; Stock indices (search for similar items in EconPapers)
Date: 2016
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DOI: 10.1007/978-3-319-38867-0_26

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