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

[qtiphife]

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

How can I "isolate" C?

Thanks

 

[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.

 

[quantumdude]

qtiphife,

Please post your questions only once. Triple posting is considered spam.

Thank you,

 

[qtiphife]

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

Man I am terrible with math.

 

[quantumdude]

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

Close. It should read:

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

You forgot the negative sign.

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

 

[qtiphife]

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

 

[Integral]

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

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

 

[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.

 

[Integral]

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?

 

[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!

 

[Gokul43201]

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.

 

[Integral]

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!