Questions answered in this chapter:
What are call and put options?
What is the difference between an American and a European option?
As a function of the stock price on the exercise date, what do the payoffs look like for European calls and puts?
What parameters determine the value of an option?
How can I estimate the volatility of a stock based on historical data?
How can I use Excel to implement the Black–Scholes formula?
How do changes in key parameters change the value of a call or put option?
How can I use the Black–Scholes formula to estimate a stock’s volatility?
I don’t want somebody changing my neat option-pricing formulas. How can I protect the formulas in my worksheet so that nobody can change them?
How can I ...