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Garman-Kohlhagen Formula

The Garman-Kohlhagen formula is given by

V_t=e^(-ytau)S_tN(d_1)-e^(-rtau)KN(d_2),

where N is the cumulative normal distribution and

d_1,d_2=(log((S_t)/K)+(r-y+/-1/2sigma^2)tau)/(sigmasqrt(tau)).

If y=0, this is the standard form of the Black-Scholes formula.

See also

Black-Scholes Theory

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References

Garman, M. B. and Kohlhagen, S. W. "Foreign Currency Option Values." J. International Money and Finance 2, 231-237, 1983.Price, J. F. "Optional Mathematics is Not Optional." Not. Amer. Math. Soc. 43, 964-971, 1996.

Referenced on Wolfram|Alpha

Garman-Kohlhagen Formula

Cite this as:

Weisstein, Eric W. "Garman-Kohlhagen Formula." From MathWorld--A Wolfram Resource. https://mathworld.wolfram.com/Garman-KohlhagenFormula.html

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