The Black-Scholes option pricing model (1973) can be intimidating for the novice. By rearranging and combining some of the variables, one can reduce the number of parameters in the valuation problem from five to two: 1) the option's moneyness ratio and 2) its time-adjusted volatility. This allows the computationally complex Black-Scholes formula to be collapsed into an easy-to-use table similar to those in some popular textbooks. The tabular approach provides an excellent tool for building intuition about the comparative statics in the Black-Scholes equation. Further, the pricing table can be used to price options on dividend-paying stocks, commodities, foreign exchange contracts, futures contracts, and exchanges of assets, and can be inverted to generate implied volatility. Formulas for reproducing the tables in Excel are included.

Document Type


Publication Date

Spring 2003

Publisher Statement

Copyright © 2003 Financial Management Association. This article first appeared in Journal of Applied Finance 13, no. 1 (Spring 2003): 46-55.

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