More On Blackscholes

In this section, we take a closer look at the inputs into the option pricing formula and their effects on option values. Table 24.4 summarizes the inputs and their impacts (positive or negative) on option values. In the table, a plus sign means that increasing the input increases the option's value and vice versa.

Table 24.4 also indicates that four of the five effects have common names. For fairly obvious reasons given their names, these effects are collectively called the "greeks." We will discuss them in the next several sections. In some cases, the calculations can be fairly involved, but the good news is that options calculators are widely available on the Web. See our nearby Work the Web box for one example.

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