MAF302 Corporate Finance Study Guide Important Instruction This study guide provides you of an overview for each of the topic taught in this unit. These overviews however are not sufficient to learn all the materials in each of the topic. I therefore would suggest you to follow the materials in lecture notes and workshops. It is also essential to read and consult the corresponding text book chapters to develop your concept and knowledge in this unit. You will also find some references
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usually lower than the coupon that would have to be paid on a similar issue of straight bonds‚ issued at the same time and for the same maturity. This is because investors in convertibles are prepared to accept a lower interest yield in return for the option to convert the bonds into equity at a future date. One of the attractions of convertible bonds to investors is that if the share price rises sufficiently over time‚ there will be an opportunity to profit from converting the bonds into equity. •
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ECG 528 Asset Pricing Lecture 1 Prof. Antje Berndt Fall 2013 1 / 27 Overview Today • Course overview • Introduction to Derivatives Securities Buzzwords: Derivatives; Forwards; Futures; Options; Traders; Hedge funds Readings: Chapter 1 in Hull Practice problems: 1.1-1.10 Next time • Futures‚ Hedging using futures 2 / 27 Course Overview • The syllabus‚ posted on the class website‚ describes the policies and the procedures for this course. Please read it carefully.
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Two different options to mimic | 1) X=87.5 call option‚ expiring at Nov 16‚ 2012. 2) X=90 call option‚ expiring at Nov 16‚ 2012. | 2. Calculate the annualized standard deviation: σ=0.1357502 Completed calculation table (See Appendix) 3. Replicating Portfolios X=87.5 call option Completed calculation table (See Appendix) X=90 call option Completed calculation table (See Appendix) a. A discussion of how well the synthetic option price tracked the actual option price for each
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variable costs and companies try to hedge against any upward spikes. Although‚ it is possible to pass on these fuel surcharges to the customers‚ there is a limit to any increases in order for the firm to continue offering competitive pricing. Call options are often used as the solution and bought at a certain fuel strike price‚ to hedge against a rise in the future. If the actual price rises
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the exchange risk associated with the award payment being dispersed in British Pounds (GBP). He originally considered a forward contract or a spot contract‚ but is now investigating how currency options could help hedge against uncertain foreign exchange exposure. The CFO needs to decide whether or not options contracts might provide some benefit to hedge the currency risk. As of 1/14/86‚ Dozier has received a 10% deposit of the total contract value of £1‚175‚000.00. At the 1/13/86 exchange rate
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AGAINST THE GODS The Remarkable Story of Risk By Peter L. Bernstein I have to admit I was pleasantly surprised by Against the Gods. I expected this book to be a typical dry book on a given financial subject‚ detailing use‚ application‚ and theory. I completely took for granted the fact that math‚ particularly risk‚ has history. The author did a fantastic job of painting a picture and explaining how‚ why and when concepts we use today came into being. While reading this book I became excited
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expects to see the yen appreciating again the dollar and is offering forward rates that are in line with this expectation. These forward rates would put Tiffany in another long position which would not hedge against our exchange risks. Our next option to hedge against any ForEx
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“A Report On Pricing and Technical Analysis of Derivatives” THE INDIAN INSTITUTE OF PLANNING AND MANAGEMENT EXECUTIVE SUMMARY The emergence of Derivatives market especially Futures and Options can be traced back to the willingness of the risk adverse economic agents to guard against themselves against the fluctuations in the price of Underlying asset. Derivatives‚ whose price is determined by the price of underlying asset‚ generally do not cause any fluctuations in the price of underlying
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company’s position to protect them from exchange rate risk or should she just let things continue the way they are. We believe that before buying a hedge option‚ she should forecast the profit or loss she may incur with the hedge. So‚ since she expects the USD to appreciate‚ it would be advisable for her to either short a forward contract or call option. A forward contract is an agreement between a corporation and a financial institution to exchange a specific amount of a currency at a specified exchange
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