Introduction to Options A. Basics of options B. Payoff Charts for Options C. Basics of options pricing and option Greeks Fundamentals of options pricing ptions Overview of Binomial and Black-Scholes option pricing models verview Basics of Option Greeks D. Uses of Options NISM-Series-VIII: Equity Derivatives Certification Examination VIII: Page 1 of 2 NATIONAL INSTITUTE OF SECURITIES MARKETS An Educational Initiative by SEBI V. Option Trading Strategies A. Option spreads and
Premium Futures contract Derivative Derivatives
Plc. Discussion You have receivables of AUD 28 million (to be paid in 3 months) You need to identify the most appropriate strategy to be used in hedging the transaction exposures. Choose between: i. Forward market hedge ii. Money market hedge iii. Options hedging Strategy 1: hedging using forward contract Because Hogan will receive AUD in 6-months‚ their concern is that they’ll have to convert the AUD to less USD. 1) Today‚ Hogan buys a forward contract to sell AUD (they’ll receive in 6 months) at
Premium Forward contract Futures contract Derivative
B‚ Oysters Arundel Partners: The Sequel Project With the purchase of sequel rights‚ what Arundel is achieving is to have a call option on the revenue that each movie brings. This helps to remove the uncertainty and risks associated with producing a movie‚ especially with regard to moviegoers’ taste. With the sequel right‚ Arundel will only exercise this option to produce a sequel if the first movie proved to be popular and the sequel is hence predicted to bring in profits. This provides downside
Premium The Walt Disney Company Walt Disney Option
the Canadian dollar is no longer worth $1.0717 U.S. (3) Please make a detailed recommendation to Cain in regard to hedging her position. Should she hedge? Why or why not? If she should hedge‚ which approach should she use? If you decide to use options‚ specify and justify the strike price. First and foremost‚ neither of the strategies will provide a perfect hedge. The currencies are correct‚ but the date to expiration is not. This will result in some currency risk. Although these strategies will
Premium United States dollar Dollar Currency
satisfy the exchange that they are creditworthy to transact. The initial purpose of derivative contracts was to allow traders to hedge risk which they faced in the cash market. Two of the most popular derivative instruments are financial futures and options. Financial futures commit the parties to buy or sell underlying assets at set prices on an agreed future date. The benefit of financial futures in its most basic form can be exemplified by a poultry farmer who is worried about the risk of price fluctuations
Premium Futures contract Derivative Option
Investment Theory and Strategies A. Passive vs. Active Strategy i. Passive One of the most profound ideas affecting the investment decision process‚ and indeed all of finance‚ is the idea that the securities markets‚ particularly the equity markets‚ are efficient. In an efficient market‚ the prices of securities do not depart for any length of time from the justified economic values that investors calculate for them. Economic values for securities are determined by investor expectations about earnings
Premium Stock market Option Financial markets
1. | Question : | (TCO C) Blease Inc. has a capital budget of $625‚000‚ and it wants to maintain a target capital structure of 60 percent debt and 40 percent equity. The company forecasts a net income of $475‚000. If it follows the residual dividend policy‚ what is its forecasted dividend payout ratio? (a) 40.61% (b) 42.75% (c) 45.00% (d) 47.37% (e) 49.74% | | | Student Answer: | | (d) 47.37 Equity required (Residual income) = $625‚000*40% = $250‚000 Dividend paid = $475‚000 - $250
Premium Finance Bond Stock
sequel rights. 2. OBJECTIVE Our report aims to investigate the viability of the implementation of Arundel’s strategy in purchasing sequel rights to produce potential successful movie sequels. The discount cash flow (DCF) approach and the real option pricing approach were adopted in valuing the sequel rights purchased by Arundel respectively. The value of these sequel rights is then compared to the estimated $2M per film required in purchasing the rights to see if Arundel will gain by purchasing
Premium Normal distribution Film Derivative
CH10 The government debt totaled 27% of total credit market debt although this number has risen since that time.Mortgages comprised 28%‚ Corporate and Foreign Bonds 22% and Municipal Bonds 5% of total credit market debt in the third quarter of 2008. The issuing company may choose to call the bond and require the bondholder to turn in the bond in exchange for receiving the bond’s call price. A callable bond gives the issuing company the right to call in the bond by paying the bondholder the call price
Premium Bond Futures contract Option
Chapter 3 3. Discuss why international diversification reduces portfolio risk. Specifically‚ why would you expect low correlation in the rates of return for domestic and foreign securities? International diversification reduces portfolio risk because of the low correlation of returns among the securities from different countries. This is due to differing international trade patterns‚ economic growth‚ fiscal policies‚ and monetary policies among countries. 7. Some investors believe that
Premium Option Futures contract Short