Hi Can someone explain to me the different Black-Scholes formula on p3 and p23 in Chapter 12? p3 - European call option A: c = P(0,T)[F0*N(d1) - X*N(d2)] p23 - value of equity as a call option on value of assets with strike price as amount of debt, D. B: E0=V0*N(d1) - D*e^(-rT)*N(d2) My questions are: 1. Why is the term P(0,T) not in B? 2. The formula of d1 are different for A and B. The d1 formula for B has an extra 'r'. Why is that? Thank you very much.
Black scholes Hi, These formulae are different in a number of ways but tackle the same problem. The main diference is that on uses a futures price as the underlying and the other uses a spot price. Because of this various discount factor (like P(0,t) ) disappear.
