vba option pricing
How to build a Black Scholes VBA Option Pricer
Introduction
The Black Scholes Model of Stock Prices
Fischer Black, Myron Scholes and Robert Merton made significant advances in the development of options pricers with their papers published in 1973.
According to the Black Scholes model, the price path of stocks is defined by the following stochastic partial differential equation
The development of a transparent and reasonably robust options pricing model underpinned the transformational growth of the options market over the decades to follow.
dS = (r - q -1/2sigma^2)dt + sigma dz
In this document the key assumptions of the Black Scholes model are defined, the analytical solutions to the Black Scholes differential equations stated. where dz is a standard Brownian motion, defined by dz = epsilon * sqrt(dt) where epsilon is a standard normal random variable; dS is the change in stock price, r is the risk-free interest rate, q is the dividend of the stock, sigma the volatility of the stock.
The model implies that dS/S follows a normal distribution with mean
Having shown the solutions, this document shows the development of the
VBA user defined functions required for implementation of Black Scholes
VBA analytical pricing solutions using Excel.
r - q -1/2sigma^2, and standard deviation sigma * epsilon * sqrt(dt))
The key benefits of defining a custom function in Excel for using Black
Scholes in VBA include
St = S0 * exp( (r – q - ½ sigma^2) dt + sigma * epsilon * sqrt(dt))
Saving time – custom functions enable reusability of the function across different worksheets when placed in an add-in
Reduced risk of user error
Functions are also extensible
1
Nyasha Madavo, VBA Developer.net
As such the price at time 0 < t
Introduction
The Black Scholes Model of Stock Prices
Fischer Black, Myron Scholes and Robert Merton made significant advances in the development of options pricers with their papers published in 1973.
According to the Black Scholes model, the price path of stocks is defined by the following stochastic partial differential equation
The development of a transparent and reasonably robust options pricing model underpinned the transformational growth of the options market over the decades to follow.
dS = (r - q -1/2sigma^2)dt + sigma dz
In this document the key assumptions of the Black Scholes model are defined, the analytical solutions to the Black Scholes differential equations stated. where dz is a standard Brownian motion, defined by dz = epsilon * sqrt(dt) where epsilon is a standard normal random variable; dS is the change in stock price, r is the risk-free interest rate, q is the dividend of the stock, sigma the volatility of the stock.
The model implies that dS/S follows a normal distribution with mean
Having shown the solutions, this document shows the development of the
VBA user defined functions required for implementation of Black Scholes
VBA analytical pricing solutions using Excel.
r - q -1/2sigma^2, and standard deviation sigma * epsilon * sqrt(dt))
The key benefits of defining a custom function in Excel for using Black
Scholes in VBA include
St = S0 * exp( (r – q - ½ sigma^2) dt + sigma * epsilon * sqrt(dt))
Saving time – custom functions enable reusability of the function across different worksheets when placed in an add-in
Reduced risk of user error
Functions are also extensible
1
Nyasha Madavo, VBA Developer.net
As such the price at time 0 < t