A very basic Black Schole Question

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A very basic Black Schole Question

Postby sraks » Wed Oct 06, 2010 3:45 pm

Dr. Joshi and fellow users,

I have a very basic Black Scholes equation. The formula for call price is

C = S * N(d_1) - K * disc_factor * N(d_2)

The question is this : in the above formula, d_1 and d_2 depend on the value of the S. So, why is that fact ignored while deriving delta = del_C/del_S ? The well-known answer is of course N(d_1). What am I missing here?

Regards,
SR
sraks
 
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Re: A very basic Black Schole Question

Postby mj » Wed Oct 06, 2010 11:33 pm

The extra terms cancel.

see

http://www.nuclearphynance.com/Show%20Post.aspx?PostIDKey=144978

You have posted in the wrong part of the forum...
mj
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Re: A very basic Black Schole Question

Postby sraks » Sat Oct 09, 2010 11:51 pm

Dr. Joshi, thanks for the neat derivation under S-measure. Also, I did the long hand calculation and was able to have those additional terms cancelled.

Regards,
SR
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Re: A very basic Black Schole Question

Postby addie » Thu Jan 03, 2013 7:15 am

The extra terms cancel.
addie
 
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