Black Scholes-N(d1)

[ksn]

Can someone explain that after calculating d1 and d2 from formulas how do we calculate N(d1) and N(d2)? Will N(d1) and N(d2) be given on the exam?
Thanks.

 

[ZeroBonus]

I don’t think we need to know how to calculate the components of BSM for the exam

 

[ksn]

I didn’t know that? What do we need to know about BSM?

 

[clementvc]

I skip that one

 

[ZeroBonus]

ksn Wrote:
——————————————————-
> I didn’t know that? What do we need to know about
> BSM?
The assumptions and the 5 inputs you need for the model along with their effect on option value
Volatility
Strike Price
Rf
current price
time to expiration

 

[passme]

Nd1 and Nd2 are just deltas for calls and put respectively.
AKA, change in the price of call/put over changes in price of underlying.
you need to know how to calculate them because there are questions asking you about dynamic hedging for your current stock/option position.
dynamic hedging = big part in derivatives too….

 

[janardhanc]

N(d1) and N(d2) are standard normal probabilities. See appendix in volume 1.

 

[magicskyfairy]

I dunno about Nd2, but I know this:
delta for a call = Nd1
delta for a put = Nd1 - 1
to have a perfectly hedged portfolio, for every unit of stock you own, you must sell:
1/(Nd1) call options
1/(Nd - 1) put options <– will be a negative number, indicating you actually buy puts