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Using Goal Seek in CM2A

Z

zusammen

Member
Hello all,

I was wondering if we could use the Goal Seek function in Excel to find, say, the implied volatility of the share in the Black-Scholes formula instead of having to do linear interpolation, as well as qnorm and pnorm functions in R in paper A. And if yes, how to articulate the fact that I use Excel/R in my paper?

Thanks and best regards,
 
Remember that Excel/R is just a calculator. You don't have to explain in Paper A how the maths was computed (ie which functions you used to get the numerical answer) but you do need to explain your mathematical working.
For implied volatility I'd use Goal Seek to find the answer and then demonstrate that it's the right answer by linearly interpolating between two carefully chosen points (which straddle the previously found result).
For the normal distribution calculations you can simply write the numerical answer out without reference to pnorm or NORM.S.DIST(x,TRUE). Your written answer should include the symbol "PHI(x)" somewhere to denote the cumulative distribution function of the standard normal distribution.
Hope that helps.
 
Steve Hales said:
Remember that Excel/R is just a calculator. You don't have to explain in Paper A how the maths was computed (ie which functions you used to get the numerical answer) but you do need to explain your mathematical working.
For implied volatility I'd use Goal Seek to find the answer and then demonstrate that it's the right answer by linearly interpolating between two carefully chosen points (which straddle the previously found result).
For the normal distribution calculations you can simply write the numerical answer out without reference to pnorm or NORM.S.DIST(x,TRUE). Your written answer should include the symbol "PHI(x)" somewhere to denote the cumulative distribution function of the standard normal distribution.
Hope that helps.
Click to expand...
Thanks, it cleared things up for me.
 
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