The Black-Scholes formula is the most commonly used financial model used for pricing options. Below we have two tutorials for implementing the Black-Scholes model in both Excel & Python.
def blackScholes(r, S, K, T, sigma, type="c"):
"Calculate BS price of call/put"
d1 = (np.log(S/K) + (r + sigma**2/2)*T)/(sigma*np.sqrt(T))
d2 = d1 - sigma*np.sqrt(T)
try:
if type == "c":
price = S*norm.cdf(d1, 0, 1) - K*np.exp(-r*T)*norm.cdf(d2, 0, 1)
elif type == "p":
price = K*np.exp(-r*T)*norm.cdf(-d2, 0, 1) - S*norm.cdf(-d1, 0, 1)
return price
except:
print("Please confirm option type, either 'c' for Call or 'p' for Put!")
Even in today’s age when everyone wants to be a ‘wizz kid’ who can program, we cannot ignore the power and simplicity of Excel as the backbone of the Financial Industry.
Excel is a great resource, however I find when the problems I am trying to solve get more complicated, or more iterations or processing is required, Python is a more effective tool for such cases as a simple scripting language.