Hello, I need to hold a short presentation about the black scholes equation. It's for a side course at my university which I visit for "fun" and out of curiosity so I am not 100% familiar with some terms etc.
The mode relies on several underlying assumptions for it to work:
The underlying security pays no dividends // How can I understand this? Does that mean if I want to sell the option in 2 years, i don't get any dividends from it in the meantime?
The volatility of the underlying security remains stable during the period of the contract // I get it that these are just assumptions but does this ever happen? That the volaitility remains stable?
Interest rates remain constant during the period of the contract // In which case wouldn't they stay constant?
And last but not least I would like to know how to "test" the forumla. I see some online calculators but are there any securities I can check online and use their value ?
thank you and excuse my cluelessness
Submitted January 24, 2016 at 07:27AM by Fireche http://ift.tt/1nHmaHD
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