E09-G11 Mridul Arora‚ Florent Bernard‚ Jacqueline Kwok‚ Pu Wang E09-G11 Sally Jameson Case 1. How much is the option compensation package worth With the 5-year T-Bill yield‚ we can calculate the rf rate‚ compounded continuously‚ input for the BlackScholes model. e5r = 1 + (5-year T-Bill yield) e5r = 1.0602 r = 0.0117 Exercise price X 35 Given by case text Current stock price Volatility of stock returns Time to maturity S ơ Ƭ 18.75 43% 5 r 6.02% 1.17% Given by case text Approximation given
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choose between either to purchase a forward contract and lock the cost of the January US$7million or to purchase call options for the USD for $7.5million‚ and which course of action will provide the highest benefit and lowest risk possible under different exchange rates. Should the CAD depreciate with respect to the USD Pixonix costs would be higher. Question #2 Various Hedging Options: a) Purchase a forward contract Cain can eliminate exchange rate risk by engaging in a forward contract by
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Question 5 - 10 marks (Equity Options) It is January 2nd‚ 2014 and Google Inc. (GOOG) stock is currently trading on the Nasdaq at a price of $1‚105.00 US dollars. Using the information provided below‚ please answer the following questions: (Note: ’Last’ means the last traded price of the put or call option. Use this number for your calculations). Call options: Put options: a) Based on the current stock price‚ which one of the two options is in the money? by how much? (1 marks) b)
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put‚ call and strike prices of a stock belonging to a company listed on a known index. 2. To use the BSM Model to which provides a mathematical science for the pricing and hedging of European Call and Put options as the American Options market 3. We wanted to analyze the data for Google option prices from the S&P index over the past and present time periods in order to be able to forecast the future. Literature Review 1. Put call parity In financial mathematics‚ put–call parity
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of the call options is $21.5‚ and capped at $39.5. Thus this is a combination of a call option at $21.5 and a put option at $39.5 two options‚ and the value is the difference between the two. Based on the Balck-scholes call formula‚ among which‚ ； 1）The price of call option with the strike price of $21.5: S=$20;K=$21.5;r=5.5%;T-t=0.5yrs;σ=75% 2）The price of put option with the strike price of $39.5: S=$20;K=$39.5;r=5.5%;T-t=0.5yrs;σ=75% The price of the capped calls should
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etc.). Explain why. 5. Forward or Options? If Tiffany were to hedge the yen-dollar exchange rate risk‚ it can choose either forward contracts or options. Explain how Tiffany can hedge using forward contracts? How to hedge using options? The available forward contracts and options are described in Exhibit 8‚ assuming Tiffany can only use those derivatives to hedge. Based on what you have learned in this course‚ what are the pros and cons of using options to hedge compared to using forward contracts
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The Society for Financial Studies The Information in Option Volume for Future Stock Prices Author(s): Jun Pan and Allen M. Poteshman Source: The Review of Financial Studies‚ Vol. 19‚ No. 3 (Autumn‚ 2006)‚ pp. 871-908 Published by: Oxford University Press. Sponsor: The Society for Financial Studies. Stable URL: http://www.jstor.org/stable/3844016 . Accessed: 09/04/2013 01:56 Your use of the JSTOR archive indicates your acceptance of the Terms & Conditions of Use‚ available at . http://www
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Series A and Series B preferred stock of TIp-Top that it will transfer to InsureAll. Series A stock is traded publically and has a call option written by InsureAll which allows the repurchase of the stock two years after the transfer date with a fixed exercise date. The Series B preferrd stock‚ which is not publically traded‚ will be transferred to InsureAll with a call option attached to the stock allowing DrugKing to repurchase the stock from whomever owns it as long as the purchase is completed within
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(2.5) points. a) The Chart on Exhibit 20-2 displays five FDA approvals and five FDA disapprovals. b) The total value of dollars of the NPV disapproval is -$100M $500M‚ 50% 3. (a) This type of call option are created whenever you face a decision that is costly to reverse. When exercising an option to invest‚ the ability to purchase a particular stock is irreversible. You can delay in purchasing the stock‚ but you are
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(Due Tuesday‚ Dec. 2) 1. (20 pts) On a recent day‚ Microsoft stock (symbol: MSFT) was at $25. Assume the nearby MSFT 25 call was selling for $1. Draw a hockey stick diagram for a long position in the MSFT 25 call. 2. (40 pts) If the MSFT 24 call is selling for $2.50‚ and the MSFT 25 call is selling for $1‚ construct a bull spread using these nearby 24 and 25 calls. a. (20 pts) Construct a table like the ones we did in class showing profit and loss at relevant stock prices for each part
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