# How do I solve this?

1. Oct 6, 2004

### qtiphife

X-(S+P-C)E^RT+D*E^RT=0

How can I "isolate" C?

Thanks

2. Oct 6, 2004

### Muzza

Assuming E^RT means E^(RT)...

X - (S + P - C)E^(RT) + D*E^(RT) = 0
<=>
X + D*E^(RT) = (S + P - C)E^(RT)
<=>
X/E^(RT) + D = (S + P - C).

Etc.

3. Oct 6, 2004

### Tom Mattson

Staff Emeritus
qtiphife,

Thank you,

4. Oct 6, 2004

### qtiphife

So would this be X/E(RT)+D-S+P= C

Man I am terrible with math.

5. Oct 6, 2004

### Tom Mattson

Staff Emeritus

X/E(RT) + D - S + P = -C

You forgot the negative sign.

Divide both sides by -1, and you're done.

6. Oct 6, 2004

### qtiphife

Oh yeah, and (rt) have different "T's". Thanks.

7. Oct 6, 2004

### Integral

Staff Emeritus
TIME OUT!

are you saying that in you original realationship that the T is not the same in the 2 expressions where it is used?

X-(S+P-C)E^RT+D*E^RT=0

Do you actually mean

$$x - (s+ p - C) e^{Rt} + D e^{RT} = 0$$

If so then

$$C = x e^{-Rt} + D e^{R(T-t)} - S +P$$

8. Oct 7, 2004

### qtiphife

Guys, thanks a ton for your help, however I am still not getting the correct answer. Here are what the letters stand for:

X (Strike Price)= 50
S (Price of underlying) = 51
P (price of put)= 2.125
e (euler's number) = 2.781
R (rate of interest)= .08
t (time until options expire)= 31/365
T (time until dividend paid)= 25/365
D (dividend)=.46
C (price of call) = ??????????
I keep on getting a negative number. Any help would be much appreciated. Thanks.

Last edited: Oct 7, 2004
9. Oct 7, 2004

### Integral

Staff Emeritus
It would be more helpful if you were to give the physical signifcance of the equation and parameters. Where did you get it? What is it for? Why can't C be negative?

10. Oct 7, 2004

### qtiphife

Sure,

This formula represents a stock's value with dividend due to the put call parity (kind of a pain to explain), but it has to do with buying or selling a stock (underlying) and buying (selling) and selling (buying) options in order to hedge your position in order to create "edge". X represents the strike price the options are bought, and P is the value of the put and C is the value of the call. I need to know the value of the call.

Please look at my previous post for all of the information.

Thanks!

Last edited: Oct 7, 2004
11. Oct 7, 2004

### Gokul43201

Staff Emeritus
In your previous posts, you only talk of one T. Now there's two : t and T. So, which is which ?

One more thing. Everyone seems to have copied and repeated a line you wrote, with an uncorrected error :

Post #4 : "So would this be X/E(RT)+D-S+P= C"

Besides, the negative C correction, note that the LHS should really be X/E(RT)+D-S-P. Minus P, not plus.

12. Oct 7, 2004

### Integral

Staff Emeritus
Opps!

You would and should come up with a negitive number, since I lost a negative sign! Try this:

$$C =S+P- x e^{-Rt} - D e^{R(T-t)}$$

My apologies for the sloppy algebra!