Subject: Black-Scholes Model (Mac Excel 3.0) Date: April 22, 1994 Author: Gary Funck (gary@intrepid.com) Intrepid Technology, Inc. Mountain View, CA Tel: (415) 964-8135 COPYRIGHT/DISCLAIMER: this software is offered AS IS, no warranty offered or implied. The software has not been extensively tested, and is very much a prototype. Expect problems, and USE AT YOUR OWN RISK. The author grants free, unlimited use of this software and its source code. You may freely incorporate the software in other products or or software distributions. If you do use the source code the author requests a simple written acknowledgement in the form of program comments, or at an appropriate place in your program's documentation. Also, if you make improvements that you want to share with others, or find problems, the author would like to hear about them, so that improvements and fixes can be integrated into the next release of this software. Please send fixes and problem reports to the author, Gary Funck, via e-mail to: gary@intrepid.com. This spreadsheet implementation of the Black-Scholes option pricing formula is written as a set of Excel function macros, using MacExcel 3.0. The file bs_excel.sit.hqx is a binhexed, Stuffit archive. To unpack the files, use a program such as 'Stuffit Deluxe' or 'Eudora'. Decode the binhex file, and then extract the files from the archive. You may be able to convert these spreadsheets for use on an IBM PC (or clone), by first unpacking on a Mac, then 'saving as ...' a format that can be understood by the PC implemenation of Excel. I haven't tried this. If you are successful, I'd like to hear about it. Better yet, just go ahead and make the PC version generally available. The Black-Scholes implementation in these spreadsheet functions only implement call options on stocks with _no_ dividends. However, the option delta, and implied volatility are implementated, along with a useful function for calculating expiration dates. For a more complete implementation of Black-Scholes (that follows the approach outlined in MacMillan's "Options as a Strategic Investment", 3rd ed.), consult the C implementation packaged in optcalc.tar.Z. I'm near completion of a set of Excel macros that implement the binomial method (Cox, Ross, Rubenstein). This method is much, much slower (when implemented as Excel macro functions), but more accurate for pricing stocks with dividends, or for pricing American style options (which permit early exercise). The binomial implemntation should be available by the end of May, 1994. If you're interested in beta-testing the spreadsheet, or better yet, want to try converting it to the PC version of Excel, and then verify its operation, please contact me at gary@intrepid.com.