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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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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variate estimate of the American Put option instead of the value as implied by the tree? It is because that control variate estimate is more accurate than the implied value by the tree. The error of the binominal tree can be reduced by using it only to calculate the difference between the price of the American and the equivalent European options with the same strike and the same time to maturity. 2. Use Solver to find the implied volatilities for all put options with strike prices between $70
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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
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www.business.unsw.edu.au Australian School of Business School of Banking & Finance FINS3635 OPTIONS‚ FUTURES AND RISK MANAGEMENT TECHNIQUES Session 2‚ 2013 Assignment Due 9 am on October 23‚ 2013 This is a group assignment to be undertaken by no more than 7 students. Group members can be formed from different tutorial classes. You may use Excel for this assignment. Submission: You must upload your assignment on UNSW Blackboard before 9am on 23/10/2013 and hand in a printed copy in the
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price C = Call option P = Put option r = Continuous risk-free interest rate δ = Continuous dividend rate t = Time σ = Volatility (Normal distribution) ∆ = Shares of stock to replicate option B = Amount to borrow to replicate option p∗ = % Chance stock will increase (using r) p = % Chance stock will increase (using α) q = % Chance stock will decrease u = Ratio increase in the price d = Ratio decrease in the price α = Expected rate of return on a stock γ = Expected rate of return on an option C0 = Current
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Exam‚ F65 April 2009 Exam F65: Financial Models in Excel Copenhagen Business School 1. April 2009 Open book exam‚ 4 hours Own computers allowed General information You must hand in your solution in Excel spreadsheet format. You must hand in 2 copies at floppy disks or CD-ROMs. Each of the exercises has been given an individual weight. These indicate to the student how much time should be used on each exercise. However‚ the final grade will not rely on these weights only‚ but might be
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SEAT NUMBER: ……….… ROOM: .………………. FAMILY NAME.………….....…………………………. This question paper must be returned. Candidates are not permitted to remove any part of it from the examination room. OTHER NAMES…………….…………………..…….. STUDENT NUMBER………….………..…………….. MID-YEAR EXAMINATIONS 2011 Unit: ACCG252: Applied Financial Analysis and Management Date: Tuesday 14th June 2011 at 8:50am Time Allowed: 3 hours plus 10 minutes reading time. Total Number of Questions: 30 Multiple Choice Questions plus
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provide the relevant calculations. Assignment is individual. Assignments should be lodged at the next lecture (if you intend not to attend the lecture but would like to submit assignment‚ contact topic coordinator). Emailing assignment is not an option as one needs to get a permission in advance to do so. If you have been granted the permission then the assignment needs to be submitted before the start of the lecture‚ i.e. before 1pm. In case the assignment is submitted after 1pm‚ it will not be
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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 locking
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