merton.core.pricing

Black-Scholes-Merton pricing helpers (public, backend-dispatched).

Functions

equity_value(→ merton._typing.FloatArray)

Black-Scholes-Merton equity value treating equity as a call on assets.

d1_d2(→ tuple[merton._typing.FloatArray, ...)

Return BSM's d1 and d2.

Module Contents

merton.core.pricing.equity_value(asset_value: merton._typing.ArrayLike, asset_vol: merton._typing.ArrayLike, debt: merton._typing.ArrayLike, rf: merton._typing.ArrayLike, T: merton._typing.ArrayLike, *, dividend_yield: merton._typing.ArrayLike = 0.0, backend: str | None = None) → merton._typing.FloatArray[source]

Black-Scholes-Merton equity value treating equity as a call on assets.

Parameters:

  • asset_value – Firm asset value A (currency units).

  • asset_vol – Annualised asset volatility σ_A (decimal, e.g. 0.25).

  • debt – Face value of debt at maturity D (the default threshold).

  • rf – Risk-free rate r (annualised, continuously-compounded decimal).

  • T – Time to debt maturity (years).

  • dividend_yield – Continuous dividend yield q (decimal). Defaults to 0.

  • backend – Override the backend dispatch. Default: auto.

Returns:

E = A·e^(-qT)·Φ(d1) - D·e^(-rT)·Φ(d2).

Return type:

FloatArray

merton.core.pricing.d1_d2(asset_value: merton._typing.ArrayLike, asset_vol: merton._typing.ArrayLike, debt: merton._typing.ArrayLike, rf: merton._typing.ArrayLike, T: merton._typing.ArrayLike, *, dividend_yield: merton._typing.ArrayLike = 0.0, backend: str | None = None) → tuple[merton._typing.FloatArray, merton._typing.FloatArray][source]

Return BSM’s d1 and d2.