Features

CPSolve is designed to be a fast single-page utility calculator for European options prices based on a generic Black Scholes formula. Key features include:

• Ability to price a wide variety of options, including options on futures, stocks or currencies.
• Forward and reverse computation of any parameter, e.g. to determine implied volatility or even the implied underlying asset price.
• For a computable combination of parameters, option sensitivities are shown, which include delta, gamma, vega, theta and rho.

Use

The first time you start CPSolve, the option parameter fields are populated with sample data. To compute the price of the European call option, tap on the “Compute” button for the “Option Price” field. The result will be shown in the adjacent data field, and the sensitivity analysis data will be shown.

You are now ready to investigate the behavior of other option parameters. For example:

• To determine the implied volatility for an options price of 4.50: (a) enter 4.50 into the option price field, then (b) tap the “Compute” button next to the “Volatility” field.
• To determine the implied underlying asset price for an options price of 5.70: (a) enter 5.70 into the option price field, then (b) tap the “Compute” button for the “Asset Price” field.

Because all values can be either typed in or computed, CPSolve provides a tremendous amount of flexibility in assessing the dynamics of each parameter. As a visual clue to the last calculation, the most recently computed value is shown in blue (rather than black).

Should the combination of parameters you enter not allow a solution to be found, the result field will be left at its previous value, and no option sensitivities will show (see right).

Most parameters are self-explanatory, however the “Carry Rate” deserves some clarification. Correct use of the carry rate is what allows CPSolve to be applied to multiple option types. Set carry rate as follows:

• For options on futures, set Carry = 0; this uses the Black 1976 futures model
• For options on stocks with a continuous dividend yield, set Carry = Risk_Free_Interest_Rate - Dividend_Yield; this uses the Merton 1973 model
• For options on currencies, set Carry = Risk_Free_Interest_Rate - Foreign_Interest_Rate; this uses the Garman and Kohlhagen 1983 model
• For the original Black Scholes 1973 stock option model, set Carry = Risk_Free_Interest_Rate

End User License Agreement

CPSolve is available for iPhone and iPod Touch from Apple’s AppStore. It has been designed with the academic or enthusiast in mind. If you base an investment decision on CPSolve alone, you will lose money! Read the full text of the: CPSolve EULA.