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Monte Carlo Simulation and Black-Scholes – Option Pricing Model

$399.99

Category: Financial Software Tools
  • Description

Description

The Black-Scholes Option Pricing Model (“BSOPM”), while theoretically correct and elegant, is applicable only to the calculation of “European-style options” without dividends, where the holder of the option can exercise the option only on its maturity date, and the underlying stock does not pay dividends. The BSOPM can be utilized when it comes to quantifying the “fair market value” of employee stock options under the above circumstances.

The Monte Carlo Path Dependent Simulation Method is appropriate for complex stock options where the complexity of the option itself makes closed form approached such as Black-Scholes intractable. Rather than solve the differential equations that define the option value in relation to the underlying stock price, a Monte Carlo Simulation model determines the fair market value of the option for a set of randomly generated economic scenarios (e.g. future stock prices, stock price volatility, option exercise behavior, stock price vs. stock index behavior). The resulting simulation yields an expected value for the stock option.

Myron Scholes (left) and Fisher Black (right), developed the Black-Scholes Option Pricing Model.

Myron_Scholes-Fischer_Black

 

 

 

 

 

 

Sample Model Results:

 

Model Assumptionspdf-file-symbol_318-62286.png

 

Black Scholes Worksheetpdf-file-symbol_318-62286.png

 

Monte Carlo Simulationpdf-file-symbol_318-62286.png

 

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Top Services

  • “Cheap Stock” or “Stock Option” Valuations
  • Business Development
  • Business Enterprise Valuation (“BEV”) Services
  • Business Plan Development
  • Litigation Support Services
  • Cost Segregation
  • Physician Practice Valuation
  • Solvency Opinion Services
  • Fairness Opinion Services
  • Transaction Services
  • Due Diligence
  • Feasibility Consulting

Professional Memberships

Our Consultants are Members of the Institute of Business Appraisers ("IBA"),

The American Society of Appraisers ("ASA"),

American Institute of CPAs ("AICPA"),

Massachusetts Society of CPAs ("MSCPA"),

The National Association of Certified Valuators and Analysts ("NACVA"),

The Institute of Management Consultants ("IMC"), &

The Appraisal Institute ("MAI")

Foxboro Consulting Group

Address: 36 Lancashire Dr. Mansfield, Massachusetts 02048
Phone : +1 (774) 719-2236
Email : moreinfo@foxboro-consulting.com
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