The Black-Scholes model can be used to estimate implied volatility. Implied Volatility can be estimated using spot price, strike price, asset price, risk-free rate, time to maturity, and dividend yield. To achieve this, given an actual option value, you have to iterate to find the volatility solution. There are various techniques available; however we will use […]
Read More →Author: Jish Bhattacharya
Exponential Moving Average in Excel
A primer on EMA: The moving average method is a commonly used technical analysis indicator. All moving averages typically use a historical data series and the current price in the calculation. An Exponential Moving Average or EMA assigns a weighting factor to each value in the data series based on its age. The most recent data gets the greatest […]
Read More →Find Implied Dividend Yield from Option Prices
Dividend estimates are, not only of interest to equity investors who want to earn a steady income, but they also play an important role in derivative pricing for equity forwards, futures, and options including dividend futures and options. This post shows how to calculate the implied dividend of an option. The implied dividend yield is the […]
Read More →Calculate MACD in Excel
Moving Average Convergence Divergence (MACD) is a popular trend-following momentum indicator. The MACD turns two trend-following indicators, moving averages, into a momentum oscillator by subtracting the longer moving average from the shorter moving average. MACD is calculated by taking difference between 12 day Exponential Moving Average (EMA) and 26 day EMA. A positive MACD means the 12-period EMA […]
Read More →Adword Budget Optimizer
How much should my AdWords budget be? This is a very common and an important question for advertisers. It is also one that doesn’t have a straightforward answer. If AdWords is profitable for you, then by all means your budget should be as high as possible. If AdWords is not profitable for you, then your budget […]
Read More →Simple Revenue Model Simulation
Build a Revenue Model through Simulation Revenue prediction and forecasts are typically done to be too right. They create a false sense of precision that ultimately falls short and does a disservice to managers who need accurate forecasts for planning. Even meteorologists equipped with voluminous historical data and supercomputers cannot get it right all the […]
Read More →Risk Adjusted Investment Performance Measures
Your portfolio can have a positive long term impact when the risk efficiency of your portfolio is maximized. Many investors tend to be risk averse. So, if you are going to assume some risk in your portfolio as a trade off for a higher return, you should aim to get the most out for your […]
Read More →Simulating Call Option Variance Reduction
A common shortcoming of standard Monte Carlo Simulation is the required computing resources and time. MC simulation typically has an error variance of σ2/n.To achieve a desired accuracy in a crude MC simulation, the sampling is conducted with a larger value of n. But this approach decreases the efficiency of the simulation. In this post, I will explore few […]
Read More →Binomial Option Pricing Excel
A Primer on Binomial Option Pricing A binomial tree represents the different possible paths a stock price can follow over time.To define a binomial tree model, a basic period length is established (such as 1 month). If the price of a stock is known at the beginning of a period, the price at the beginning of […]
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