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Finance & Stock Groups Forum Index » Options » Risk Free Interest Rate
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| Guest |
 Posted: Wed Oct 29, 2008 1:15 am |
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I am trying to do some calculations using the black scholes option
pricing model. The variable I am missing is the risk free interest
rate (the U.S. Government Treasury Bill rate). How is this value
acquired? I can see that some values may be acquired from here:
http://www.ustreas.gov/offices/domestic-finance/debt-management/interest-rate/daily_treas_bill_rates.shtml
However, it doesn't help for time periods not listed. For example,
November options have 24 days left... and though the 4 week time
period is close, I am hoping to get more accurate. Also consider
leaps which are 14 months out, the data provided here doesn't help me.
I've found that some places such as Morningstar are using the rate in
their calculations. For example, consider the HTML source code for:
http://quote.morningstar.com/Option/Options.aspx?sLevel=A&ticker=AAPL
The script in the source code has the interest rates for each set in
the option chain:
var strRate = "0.4191,0.5427,0.7028,1.1825,1.5440,1.6823";
Or:
Nov 21, 2008 (24 days) = 0.4191
Dec 19, 2008 (52 days) = 0.5427
Jan 16, 2009 (80 days) = 0.7028
Apr 17, 2009 (171 days) = 1.1825
Jan 15, 2010 (444 days) = 1.5440
Jan 21, 2011 (815 days) = 1.6823
In my tests, these risk free interest rate values are correct. How
does Morningstar acquire this information?
Thanks |
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| Dr Tormento |
| Posted: Wed Oct 29, 2008 7:04 pm |
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Guest
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agendum97@gmail.com wrote in
news:c1a40efa-151e-48db-a924-f76921cf9791@w39g2000prb.googlegroups.com:
Quote: However, it doesn't help for time periods not listed. For example,
November options have 24 days left... and though the 4 week time
period is close, I am hoping to get more accurate.
Interest rates have only a small influence on options prices. It makes no
difference whether you use a 4 week interest rate instead of a 24 day
interest rates. Likewise, you can use a 1 year rate for anything within a
few months of one year. Market volatility is far more important in option
calculations. |
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