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Exploring the Black-Scholes Formula

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put option
call option
stock price
50
strike price
50
stock volatility
0.4
risk-free rate of interest
0.25
dividend yield
0.25
time to expiry
0.25
stock and strike
mesh off
mesh on
This Demonstration graphically explores the Black–Scholes formula for the value of European call and put options. First, choose whether you wish to explore a call option or a put option. Next, using the pull-down menu, choose two (out of six) parameters that will be treated as independent variables in the graph (the option value being the dependent variable). Vary the remaining parameters (or the two chosen variables) to explore the changes in the option value and the shape of the surface. A point on the surface represents the option value for given values of the variables and parameters. To see the option value, turn the mesh off and place the mouse over the point.
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