Black & Scholes

Nyptop · Nov 20, 2011

I have this code (bare in mind that S= Stock price, X=Strike price, T=Years to maturity, r= Risk-free rate, v=Volatility):

Sub button5_click As Button
'// The Black and Scholes (1973) Stock option formula

S = edittext1.Text
X = edittext2.Text
T = edittext4.Text
r = edittext3.Text
v = edittext5.Text

d1 = (Logarithm(10,(S / X)) + (r + v ^ 2 / 2) * T) / (v * Sqrt(T))
d2 = d1 - v * Sqrt(T)
BlackScholes = S * CND(d1) - X * Exp(-r * T) * CND(d2)

'// The cumulative normal distribution function

Const a1 = 0.31938153: Const a2 = -0.356563782: Const a3 = 1.781477937:
Const a4 = -1.821255978: Const a5 = 1.330274429

L = Abs(X)
K = 1 / (1 + 0.2316419 * L)
CND = 1 - 1 / Sqrt(2 * 3.14159) * Exp(-L ^ 2 / 2) * (a1 * K + a2 * K ^ 2 + a3 * K ^ 3 + a4 * K ^ 4 + a5 * K ^ 5)

If X < 0 Then
CND = 1 - CND
End If
End Sub

Is the keyword 'power' a natural logarithm. Is there anything else I'm doing wrong?

magalt · Nov 20, 2011

Hi Nyptop.
If the keyword 'Logarithm' is a 'natural logarithm' then you try to change

d1 = (Logarithm(10,(S / X)) + (r + v ^ 2 / 2) * T) / (v * Sqrt(T))

with

d1 = (power(ce,(S / X)) + (r + v ^ 2 / 2) * T) / (v * Sqrt(T))

Marco

Nyptop · Nov 20, 2011

thanks, but I'm getting the error 'input string was not in correct format'. How do I go about sorting this?

Nyptop · Nov 20, 2011

Also, I want to raise the natural number to a power. is there a function specifically suited to this? If not I would still like to know how to do powers so as that I can just add the natural no. in manually. thanks again,
Nyptop

magalt · Nov 20, 2011

I'm sorry. Last formula was wrong. Try it:

d1 = (Logarithm(S / X, cE) + (r + Power(v, 2) * T)) / (v * Sqrt(T))

Marco

Nyptop · Nov 20, 2011

ah great I get the gist of things now thank you

Nyptop · Nov 20, 2011

My line that used to look like:

CND = 1 - 1 / Sqrt(2 * 3.14159) * Exp(-L ^ 2 / 2) * (a1 * K + a2 * K ^ 2 + a3 * K ^ 3 + a4 * K ^ 4 + a5 * K ^ 5)

Now is:

CND = 1 - 1 / Sqrt(2 * 3.14159) * Power(cE,(Power(-L , 2) / 2)) * (a1 * K + a2 * Power(K , 2) + a3 * Power(K , 3) + a4 * Power(K , 4) + a5 * Power(K , 5)

However I now have the error 'Invalid number of parentheses'. Any suggestions?

klaus · Nov 20, 2011

You are missing one ) at the end:
CND = 1 - 1 / Sqrt(2 * 3.14159) * Power(cE,(Power(-L , 2) / 2)) * (a1 * K + a2 * Power(K , 2) + a3 * Power(K , 3) + a4 * Power(K , 4) + a5 * Power(K , 5))

Best regards.

Nyptop · Nov 20, 2011

Thanks Again. However, when I test it out on the emulator I have a different problem. I calculate the value and all I get most of the time is either 'infinity' or 'nan'. I have attached the file if anyone would like to take a look.

klaus · Nov 20, 2011

The 'infinity' comes from here:
CND = 1 - 1 / Sqrt(2 * 3.14159) * Power(cE,(Power(-L , 2) / 2)) * (a1 * K + a2 * Power(K , 2) + a3 * Power(K , 3) + a4 * Power(K , 4) + a5 * Power(K , 5))
must be:
CND = 1 - 1 / Sqrt(2 * 3.14159) * Power(cE,(-Power(L , 2) / 2)) * (a1 * K + a2 * Power(K , 2) + a3 * Power(K , 3) + a4 * Power(K , 4) + a5 * Power(K , 5))
The '-' sign is at the wrong place.

The NaN can come from here:
BlackScholes = S * CND*(d1) - X * Power(cE, -r * T) * CND*(v * Sqrt(T-d1))
if d1 > T then Sqrt of a negative number raises the NaN error.

Best regards.

Nyptop · Nov 21, 2011

Thanks, you have been of great assistance

magalt · Nov 21, 2011

Nyptop said:
Thanks Again. However, when I test it out on the emulator I have a different problem. I calculate the value and all I get most of the time is either 'infinity' or 'nan'. I have attached the file if anyone would like to take a look.

Hi Nyptop.
Could you provide me the sample data and expected results?

S= Stock price = ???
X=Strike price = ???
T=Years to maturity = ???
r= Risk-free rate = ???
v=Volatility = ???

Call value = !!!
Put value = !!!

Marco

Nyptop · Nov 21, 2011

Thanks Marco,

Follow the link to a calculator:

Black Scholes Calculator

Nyptop · Nov 21, 2011

There is a serious problem with answers not being as they should. Here is the code in Visual Basic if you think it would be of any help:

'// The Black and Scholes (1973) Stock option formula
Public Function BlackScholes(CallPutFlag As String, S As Double, X _
As Double, T As Double, r As Double, v As Double) As Double

Dim d1 As Double, d2 As Double

d1 = (Log(S / X) + (r + v ^ 2 / 2) * T) / (v * Sqr(T))
d2 = d1 - v * Sqr(T)
If CallPutFlag = "c" Then
BlackScholes = S * CND(d1) - X * Exp(-r * T) * CND(d2)
ElseIf CallPutFlag = "p" Then
BlackScholes = X * Exp(-r * T) * CND(-d2) - S * CND(-d1)
End If
End Function

'// The cumulative normal distribution function
Public Function CND(X As Double) As Double

Dim L As Double, K As Double
Const a1 = 0.31938153: Const a2 = -0.356563782: Const a3 = 1.781477937:
Const a4 = -1.821255978: Const a5 = 1.330274429

L = Abs(X)
K = 1 / (1 + 0.2316419 * L)
CND = 1 - 1 / Sqr(2 * Application.Pi()) * Exp(-L ^ 2 / 2) * (a1 * K + a2 * K ^ 2 + a3 * K ^ 3 + a4 * K ^ 4 + a5 * K ^ 5)

If X < 0 Then
CND = 1 - CND
End If
End Function

magalt · Nov 21, 2011

Nyptop said:
There is a serious problem with answers not being as they should. Here is the code in Visual Basic if you think it would be of any help:

'// The Black and Scholes (1973) Stock option formula
Public Function BlackScholes(CallPutFlag As String, S As Double, X _
As Double, T As Double, r As Double, v As Double) As Double

Dim d1 As Double, d2 As Double

d1 = (Log(S / X) + (r + v ^ 2 / 2) * T) / (v * Sqr(T))
d2 = d1 - v * Sqr(T)
If CallPutFlag = "c" Then
BlackScholes = S * CND(d1) - X * Exp(-r * T) * CND(d2)
ElseIf CallPutFlag = "p" Then
BlackScholes = X * Exp(-r * T) * CND(-d2) - S * CND(-d1)
End If
End Function

'// The cumulative normal distribution function
Public Function CND(X As Double) As Double

Dim L As Double, K As Double
Const a1 = 0.31938153: Const a2 = -0.356563782: Const a3 = 1.781477937:
Const a4 = -1.821255978: Const a5 = 1.330274429

L = Abs(X)
K = 1 / (1 + 0.2316419 * L)
CND = 1 - 1 / Sqr(2 * Application.Pi()) * Exp(-L ^ 2 / 2) * (a1 * K + a2 * K ^ 2 + a3 * K ^ 3 + a4 * K ^ 4 + a5 * K ^ 5)

If X < 0 Then
CND = 1 - CND
End If
End Function

The problem was on the function call.
Try this code.

Marco
(I'm sorry for my bad English)

Nyptop · Nov 21, 2011

Thank you so much for your help! And don't worry, your English is fine here

magalt · Nov 21, 2011

Nyptop said:
Thank you so much for your help! And don't worry, your English is fine here

Unfortunately there was still an error.
This works!

Marco

Nyptop · Nov 23, 2011

I have read the summary of scroll views by klaus and was wondering what is the best scrollview to use for this particular app?

klaus · Nov 24, 2011

. . . wondering what is the best scrollview to use for this particular app?

There are no different ScrollViews nor is there a best ScrollView. The principle, in all examples, consits in filling a ScrollView with different views dending on what should be displayed.
For your application, it depends on what you want to display.

If it is for the input screen, this example ScrollView example with a Panel higher than the screen is the closest to your requirement.

Having a look at your program, I have following suggestions:
- Using a same panel in the same activity, or one other activity, for both calculations instead of two, the data are the same.
- Why not give both results at the same time, same data and most of the equations are the same ?

Best regards.

Nyptop · Nov 24, 2011

Thanks, Will do Klaus. One problem still. the program pauses when I load the the scroll view layout. I think I'm doing pretty much everything right? What might a problem be?

Black & Scholes

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