I am trying to price a cash or nothing call option and I know know that the Cash or Nothing formula for a call option is $C(t,s)=Xe^{-r(T-t)}*N(d)$

If I have payoff X=100 r=0.03 T=2 $\sigma=0.3$

I would have $C(t,s)=100e^{-0.03(2-t)}N(d)$

but how would I find $N(d)$ and (T-t)as where $$ d=\dfrac{\ln(S/E)+(r-\sigma^2/2)(T-t)}{\sigma\sqrt{T-t}} $$

to calculate the price at time 0

  • $\begingroup$ why not to replace $t$ by 0!!!! $\endgroup$ – Valometrics.com Feb 18 '20 at 1:34
  • $\begingroup$ Hi thank I managed to realise that one :) I should have been more specific wish my problem of actually calculating N(d) $\endgroup$ – Jacob Mitch Feb 18 '20 at 2:15
  • $\begingroup$ @JacobMitch where is the problem with calculating $N(d)$? $\endgroup$ – Kevin Feb 18 '20 at 6:38

In your formula you have the following variables:

  • t= 0, T = the maturity of the call option which is known.
  • S is the spot value of the underlying asof t = 0 (today) which is known.
  • E is the strike of the option which is known
  • r and σ are known.

In other word all the variables are known and thus it's a straight forward formula to get N(d)


Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.