Black Scholes Option Pricing Model (BSOPM) Utilities

The basic BSOPM is found in Black, F., and M.S. Scholes (1973). "The Pricing of Options and Corporate Liabilities", J. Poli Economy 81 (Ma/Je), 637-659. The modification to account for cost-to-carry, as well as the binomial tree methods for European and American style options may be found texts such as Hull, J.C. (2000). Options, Futures & Other Derivatives, New Jersey: Prentice Hall.

We provide 3 utilities to calculate BSOPM option prices:

• bsopm.exe is a complied Fortran program which prompts user for the usual parameters and provides the calculated price. This must be installed in an executable path and run from a command line window. It does not deal with cost to carry, so for an equity option it ignores stock dividend rate; for currencies it ignores the difference bewteen domestic and foreign interest rates, and for commodities it ignores storage rates.
  
  
• bsopm.fun is an S-Plus function source code. The underlying codebase is S_ ver 3, so it should be compatible with most S+ interpreters. Just source("bsopm.fun") and have fun. This version handles cost-to-carry: see the comments.
  
  
• OptionPricing.xls is an Excel spreadsheet which calculates the BSOPM price and compares to an 8-step binomial tree model. It also handles American style pricing. Enter your parameters on the first sheet in the green area, not the greyed-out cells. The workbook is not write protected. To avoid frustration, right-click and SAVE TARGET AS, or else you'll open it up in a quasi-Excel window.

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