When computing the value of a call option using the Black-Scholes option pricing model, d₂ is calculated as:
A) σt .⁵ − 1.
B) 1 − σt .⁵.
C) d₁ − σt .⁵.
D) 1 + σt .⁵.
E) d₁ + σt .⁵.

Question

Quizplus · Accepted Answer

d₂ is calculated as d₁ minus the volatility (σ) times the square root of time (t), which is represented as d₁ − σt .⁵ in the options provided.

When Computing the Value of a Call Option Using the Black-Scholes