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Enron Mail |
Tracy,
Attached is a spreadsheet model which contains both Black-Scholes and American option valuation models. These are the generally accepted methods for valuation of options on equity. The "European" option prices assume that the option holder can exercise his options only at maturity, while the "American" style options can be exercised at any time during their life. I have assumed in the examples that the underlying equity units have a market value of $13.00 and that the options are struck at this level. The volatility input is the other main assumption. EOTT has been trading recently with a volatility ranging between 30% to 40% although looking further back, the range is much wider. To run the model, you must be linked with the options library. I am not sure what lan you are connected with, but you can coordinate with Zimin Lu (x36388) for help with loading the option library add-in module. On the ENA lan it is located under O:\research\exotica\xll\exotica.xll. This is loaded in excel using the Tools/Add-Ins and Browse to reach the add-in location. --Stinson x34748 P.S. I will mail you a hard-copy of a plot showing recent EOTT volatility as well. If you would like us to help you in running specific examples, please let me, Vince, or Zimin know.
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