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Black Scholes distinguish long rate and carry rate
Posted: November 16th, 2010, 6:41 pm
by MikeNN
I recall that Black Scholes equation distinguishes a long rate and a carry rate, however, I think most people assume that they are equal and cancel each other out. Does anyone recall the expanded version of B-S which distinguishes the 2 rates?
Black Scholes distinguish long rate and carry rate
Posted: November 16th, 2010, 6:55 pm
by daveangel
whats a long rate ?
Black Scholes distinguish long rate and carry rate
Posted: November 16th, 2010, 6:57 pm
by Hansi
Do you mean risk free rate (r) vs cost of carry (r-q) (e..g q=dividend yield for stocks etc)?
Black Scholes distinguish long rate and carry rate
Posted: November 16th, 2010, 7:06 pm
by daveangel
the cost of carry is r-q. q is actual a yield from the asset. otherwise, very pretty equation.
Black Scholes distinguish long rate and carry rate
Posted: November 16th, 2010, 7:14 pm
by Hansi
QuoteOriginally posted by: daveangelthe cost of carry is r-q. q is actual a yield from the asset. otherwise, very pretty equation.Right, don't post while watching TV, fixed.See Dave, no wiki link
Black Scholes distinguish long rate and carry rate
Posted: November 16th, 2010, 9:07 pm
by daveangel
QuoteOriginally posted by: HansiQuoteOriginally posted by: daveangelthe cost of carry is r-q. q is actual a yield from the asset. otherwise, very pretty equation.Right, don't post while watching TV, fixed.See Dave, no wiki link there is hope for you yet