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Basic Question 2 of 12
In the BSM model for a put option, d1 is calculated as 0.49 and d2 is -0.23. If you want to replicate the put option payoffs with stocks and zero-coupon bonds, you should long ______ bonds and short ______ stocks.
User Contributed Comments 2
| User | Comment |
|---|---|
| ruwanma | HI It seems the calcuation of 1-N(d2) is not correct ? it should be 1- N( -0.23)= 1-0.5910 = 0.4090 |
| RAMOST | Hi Ruwanma, they are using the normal cumulative distribution |
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Learning Outcome Statements
describe how the Black model is used to value European options on futures;
describe how the Black model is used to value European interest rate options and European swaptions;
CFA® 2026 Level II Curriculum, Volume 5, Module 32.