In determing the time when using the Black-Scholes formula, and suppose the time is 30 days, do I convert to years and use 30/365? Or do I use 1/12 and think of the 30 days as one month? Or does it even matter? I was also wondering if I would ever just use 252 since that is the number of trading days in the year? So, for example, 30 days would be 30/252 of a year in the Black-Scholes formula? I think the calculations all lead to minimal differences, but I am wondering if there is a set rule or standard protocol? Thanks!

In determing the time when using the Black-Scholes formula, and suppose the time is 30 days, do I convert to years and use 30/365? Or do I use 1/12 and think of the 30 days as one month? Or does it even matter? I was also wondering if I would ever just use 252 since that is the number of trading days in the year? So, for example, 30 days would be 30/252 of a year in the Black-Scholes formula? I think the calculations all lead to minimal differences, but I am wondering if there is a set rule or standard protocol? Thanks!

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter22: Providing And Obtaining Credit

Section: Chapter Questions

Problem 4MC

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