I have simple Matlab code for Black Scholes:

b=r; d1 = (log(S / X) + (b + v ^ 2 / 2) * T) / (v * T^0.5); d2 = d1 – v * T^0.5;

I question:

v * T^0.5)

Is this not supposed to be

d1=(log(S/X)+(r+v^2/2)*T)/(v*sqrt(T));

d2=d1-v*sqrt(T);

Who can set me straight?

## 2 Comments

Sim Con

May 18, 2011Maybe I’m getting this wrong, but sqrt(T) is mathematically the same as T^0.5, so the formulae are actually the same. Anyway, there’s an Excel spreadsheet for Black-Scholes here so you can check if Matlab is correct: http://optimizeyourportfolio.blogspot.com/2011/05/black-scholes-option-pricing-and-greeks.html

Anonymous

May 18, 2011Thanks SIm Con. I already verified that T^0.5 = sqrt(T). I have not looked at Math in this way for at least 15 years

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