HP 113394 User Guide - Page 254
Black-Scholes Formula for Valuing European Options, Depreciation
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254 Appendix E: Formulas Used Black-Scholes Formula for Valuing European Options P = current asset price. r% = risk-free rate (continuous, per time unit). s% = volatility (continuous, per time unit). T = term of option (same time unit as r% and s%). X = exercise price of option. N(z) = probability that a unit normal random variable is less than z. Call Value = P × N(d1) - Q × N(d2) Put Value = Call Value + Q - P where : d1 = LN(P/Q)/v + v/2, d2-= d1 - v Q = Xe( - T × r % / 1 0 0 ) , v=s%/100× T Depreciation L SBV SAL FACT j DPNj RDVj RBVj Y1 = asset's useful life expectancy. = starting book value. = salvage value. = declining-balance factor expressed as a percentage. = period number. = depreciation expense during period j. = remaining depreciable value at end of period j = RDVj-1 - DPNj where RDV0 = SBV - SAL = remaining book value = RBVj-1 - DPNj where RBV0 = SBV = number of months in partial first year. File name: hp 12c pt_user's guide_English_HDPMF123E27 Page: 254 of 275 Printed Date: 2005/8/1 Dimension: 14.8 cm x 21 cm