Black Scholes option pricing model and Conversion premium: Difference between pages

From ACT Wiki
(Difference between pages)
Jump to navigationJump to search
imported>Doug Williamson
m (Spacing)
 
imported>Administrator
(CSV import)
 
Line 1: Line 1:
(BSOPM).  
The premium over an ordinary share's current market price at which the holder of the convertible security may convert it into ordinary shares.
For example, say the current market price of the ordinary shares is £2, and the conversion price is £2.50.  The conversion premium = [£2.50 - £2.00 = £0.50]/£2.00 = 25%.


The Black Scholes option pricing model is an example of a risk-neutral valuation model. It models the value of European-style options on non-dividend paying assets, based on the underlying price, the strike price, the underlying volatility, the time to expiry and the risk-free rate of return.
== See also ==
* [[Conversion price]]
* [[Convertible bonds]]


== See also ==
* [[European-style option]]
* [[Leptokurtosis]]
* [[Option]]
* [[Risk neutral valuation]]

Revision as of 14:19, 23 October 2012

The premium over an ordinary share's current market price at which the holder of the convertible security may convert it into ordinary shares. For example, say the current market price of the ordinary shares is £2, and the conversion price is £2.50. The conversion premium = [£2.50 - £2.00 = £0.50]/£2.00 = 25%.

See also


Retrieved from ‘https://wiki.treasurers.org/w/index.php?title=Black_Scholes_option_pricing_model&oldid=11457’