Rearranging Black-Scholes...

nmaughan · August 28th, 2006, 7:56 am

If I know the spot price, Rf, carry, expiry, delta and the implied vol of an option, what is the quickest way to back out the option's strike price?Thanks,N

amit7ul · August 28th, 2006, 12:38 pm

strike = fwd*Exp(v*t^0.5*(x*normalinverse(delta*exp(t*rate_fixedcurrency)+0.5*v*t^0.5))x=-1 for call.....

nmaughan · August 28th, 2006, 1:21 pm

Thank you very much amit7ul. You have been very helpful.A couple of questions on your reply if I may...I assume that v = implied vol and that t = time to expiry. Is this the case?you say that x=-1 for call..... I assume therefore that it is 1 for a put?By fwd you mean the forward price of the underlying?rate_fixedcurrency you mean the risk free rate (rather than the carry rate)?Sorry to be pedantic, I just want to make sure that I understand your notations.Thank you once again.N

amit7ul · August 28th, 2006, 3:11 pm

u r right wrt notations