ADVANCED CORPORATE FINANCE BELZE Loïc Financial Options Lecture 7 – Chapter 20 ADVANCED CORPORATE FINANCE – BELZE Loïc – Adapted from 2011 Berk & DeMarzo Pearson Education 7 - 20 - 1 www.em-lyon.com © EMLYON School EMLYON Business 2011 Chapter Outline • • • • • • 20.1 – Option Basics 20.2 – Option Payoffs at Expiration 20.3 – Put-Call Parity 20.4 – Factors Affecting Option Prices 20.5 – Exercising Options Early 20.6 – Options and Corporate Finance ADVANCED CORPORATE
Premium Call option Put option Option
The questions will be indicated by letters‚ (a)‚ (b)‚ etc. Generally‚ each question is worth 1 mark. Please do not hand in a spreadsheet unless explicitly asked to do so. Introduction to the Spreadsheets Puts&Dvd.xls and Call&Dvd.xls NOTE: before opening the spreadsheets Call&Dvd.xls and Puts&Dvd.xls‚ you need to go to Tools‚ Add-Ins‚ and make sure there’s a check mark beside Analysis ToolPak-VBA. Also‚ make sure that there’s a check mark beside Solver. (To do this with Office 2007‚ click on the
Premium Option Call option Put option
Problem No. 1 on Options based on Chapter 8 A Call Option on the stock of XYZ Company has a market price of $9.00. The price of the underlying stock is $36.00‚ and the strike price of the option is $30.00 per share. What is the Exercise Value of this Call Option? What is the Time Value of the Option? EV = $36.00 - $30.00 = $6 EV = $6.00 TV = $9.00 - $6.00 = $3.00 TV = $3.00 Problem No. 2 on Options based on Chapter 8 The Exercise (Strike) Price on ABC Company’s Option is $21.00‚ its
Premium Derivative Option Stock
Econ 252 Spring 2011 Final Exam Econ 252 - Financial Markets Professor Robert Shiller Spring 2011 Professor Robert Shiller Final Exam Instructions: • • • • • • • • The exam consists of a total of twelve pages including this coversheet. There are two parts to this exam. In Part I‚ answer any sixteen of the twenty questions‚ five minutes each. The total for Part I is 80 minutes. In Part II‚ answer all seven questions. The total for Part II is 70 minutes.
Premium Option Futures contract Call option
Puts and Calls Itô Refresher Appendix* Introduction Markus Leippold University of Zurich Chris Bardgett University of Zurich Elise Gourier University of Zurich Financial Engineering – September‚ 2012 Introduction 1 / 97 Historical Degression Setting the Stage No-Arbitrage Bounds Relations between Puts and Calls Itô Refresher Appendix* Outline 1 Historical Degression Setting the Stage No-Arbitrage Bounds Relations between Puts and Calls Itô Refresher
Premium Call option Put option Option
has turned sour as BP’s stock price dipped dramatically. Upon analysing this fund-raising issuance along with the current market environment‚ we have concluded that this offering is not as valuable despite the addition of the repurchase plan (put option) after the first payment. We will be discussing our methodology on how we came up with our conclusion and we will also give several recommendations when this issuance will be worth investing in. Methodology The team decided to value the stock
Premium Option Strike price Call option
babysitter to take care of their three children. When she arrived they told her they probably wouldn’t be back until late‚ and that the kids were already asleep so she needn’t disturb them. The babysitter starts doing her homework while awaiting a call from her boyfriend. After awhile the phone rings. She answers it‚ but hears no one on the other end — just silence‚ then whoever it is hangs up. After a few more minutes the phone rings again. She answers‚ and this time there’s a man on the line who
Premium Debut albums 2006 albums Call option
Part I: Do the following Questions 1. Define American Call/Put option 10 pts Answer Options allow investors to hedge against risk. If one expects stock prices to rise‚ then he/she may like to invest in stocks. However‚ buying stocks also entails risk because of price fluctuation. The risk will be potentially large in case price falls to zero. In order to avoid risk one may like to buy a call option. An American call option gives one the right‚ but not an obligation‚ to buy a specified
Premium Standard deviation Call option Option
following table: Price of Asset in 6 Agreed Forward Price months Payoff to Short Forward 40 10 45 50 5 50 50 0 55 50 -5 60 (b) The payoff 50 50 -10 to a purchased put option at expiration is: Payoff to long put option = max [0‚ Strike price - Spot price at expiration]
Premium Futures contract Stock Call option
Options 4/3/2012 Option: you have the choice to buy something for a certain price but if the price is less than that price forget about the contract. The most you ever pay is the contract price. You have the possibility of doing better. Nothing to lose only gain since you locked in a certain price; seller of contract can only do worse. The person whom makes the contract charges a price to enter into the contract‚ the seller keeps this contract. This price is called the premium‚ options start
Premium Option Call option Put option