BSOP: 

black-scholes option pricing module

five principle drivers:

value of underlying

exercise price    P

time to expire     t

volatility    σ  standard deviation S

σ=s^2

risk free rate   r

real option

delay

expand/follow on

redeploy/switch

withdraw/abandon

assumptions: 

type of option:

american option: can be exercised (buy or sell underling good) at exercise price at  any time up to expire date.

european option: only can be exercised  (buy or sell underling good) at exercise price on the expire date.

traded option: option in standard set can be trade(sell /buy) in financial market like stock(share)

OTC(over the counter option) tailed to special size and date, usually  arranged at a bank

premium: fees to take out an option

the price =intrinsic value + time value

intrinsic price: supluse of comparing of option exercise price & item maket real price

time value: time to expire, votality of the item market price, and interest rate influence

delta,  option price change consisted with asset price change   N(d1)   △Pa=1$

gamma rate of delta 

vega   voltitilty sensitivity △s=1%

rho       sensitivity  of risk free rate

theta     sensitivity of expire time

real option:

Pe   cost of the choice,  need to pay for take the option(choice)  

Pa PV of future cash flow of the project

volatility will be given

time: year to process the choice

risk free rate , will be given