Question

What are the inputs needed for valuing a firm by using the options pricing model?

Answer 1

The following are the input require for valuing the option pricing model:

S' = Stock price =	#
D = Dividend yield =	#
S = Stock price adjusted = S'*exp(D*T) =	#
K = Strike price =	#
r = rate =	#
t = time =	#
s = standard deviation or volatility =	#

The above variable can be used in Black Scholes Model to get the option price.

Formula for call option:

C = S*N(d1)-K*exp(-r*t)*N(d2)                              

Formula for getting put option:

P = C - S + K*exp(-r*t)