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Re: st: Black-Scholes Stock Option [was: Combing Variables]


From   Nick Cox <njcoxstata@gmail.com>
To   statalist@hsphsun2.harvard.edu
Subject   Re: st: Black-Scholes Stock Option [was: Combing Variables]
Date   Wed, 27 Apr 2011 20:37:29 +0100

"Combing" is at best a typo for "combining" and a recent accident from
someone else; no call to repeat it.

In any case, please use imformative titles.

As to what commmand you should use, sounds like -generate- or a Mata
function to me.

The restriction to one amount per observation is no restriction, really.

Nick

On Wed, Apr 27, 2011 at 8:24 PM, Ferdinand Siagian <fsiagian@maine.edu> wrote:
> Hi,
>
> I would like to create a program to calculate Black-Scholes Stock Option
> Value model. The value depends on several variables; stock price, exercise
> price, standard deviation, time to maturity, and risk-free rate. I can
> develop the formula to calculate the value of call option using Stata but
> only for 1 amount for each input variable.
>
> My question is, how to program Stata if I want to calculate call option
> values using different amount of those input variables simultaneously? The
> combinations can be too many to calculate the values one by one. Is it
> possible?
>
> For example (I simplify by including only 2 amounts for each input
> variables),
> Stock price is either $50 or $55.
> Exercise price is either $65 or $70.
> Standard deviation is either 0.25 or 0.30.
> Time to maturity is 6 months or 12 months.
> Risk-free rate is 0.5% or 0.75%.
>
> What command should I use? Thank you very much for the help.
>
> Ferdi
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