20: 5‚11‚15 5. Turn back to figure 20.1‚ which lists prices of various IBM options. Use the data in the figure to calculate the payoff and the profits for investments in each of the following February expiration options‚ assuming that the stock price on the expiration date is $195. a. Call option‚ X = $190. b. Put option‚ X =$190. c. Call option‚ X = $195. d. Put option‚ X =$195. e. Call option‚ X = $200. f. Put option‚ X =$200. St =$195 COST PAYOFF PROFIT CALL 6.75 195-190=5 -1.75 PUT 3 0
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(2-3) methods of using stocks and options to create a risk-free hedge portfolio I found the research of this question to be extremely interesting. The simplest form of purchasing securities in order to reduce portfolio risk is hedging. These securities are intended to have negative correlation to the remainder of our portfolio so that it can help offset any other potential losses in our portfolio. We can hedge by buying a put option. We can buy stock with one put option with a strike of $25 and pay
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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
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FI-516 – WEEK 3 HOMEWORK PROBLEMS 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? Problem No. 2 on Options based on Chapter 8 The Exercise (Strike) Price on ABC Company’s Option is $21.00‚ its Exercise Value is $23.00‚ and its Time Value
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Lattice Model. The Lattice Model will use these user inputs to generate several outputs. In our model‚ the output being calculated is the Value Per Option‚ which is multiplied by the number of options to calculate the Total Value of Options. In our Lattice Model‚ these inputs are: Current Stock Price Exercise Price Contractual Life of the Option Suboptimal Exercise Factor Volatility Risk-Free Interest Rate Dividend Yield Number of Shares Granted The Current Stock Price is the stock price
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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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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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FNCE90011 Derivative Securities Topic 1 Fundamentals Topic Outline Basic Concepts Option Payoff and Profit Diagrams Miscellaneous Complicated Payoffs Appendix: Market Structure References Hull (8th edition) Chapters 1‚ 4.2‚ 5.2‚ 9‚ 11 Hull (7th edition) Chapters 1‚ 4.2‚ 5.2‚ 9‚ 11 Hull (6th edition) Chapters 1‚ 4.2‚ 5.2‚ 8‚ 10 Copyright © John C. Handley 2012. 1. BASIC CONCEPTS What is a derivative ? A derivative is an asset/security whose value is completely determined by the
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000 “at-the-money” employee share options on January 1‚ 2006. The awards have a grant-date fair value of $6‚ vest at the end of the third year of service (cliff-vesting)‚ and have an exercise price of $21. Subsequent to the awards being granted‚ the stock price has fallen significantly. On January 1‚ 2008‚ Murray decreased the exercise price on the stock options to $12. This downward adjustment to the exercise price was made in order to ensure that the options continue to provide intended motivation
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1. Ignoring taxation and other constraints‚ Ms. Jameson is better off taking the options. The stock currently trading at $18.75 and the exercise price is $35. This may seem drastically far away. However‚ 5 year T-Bill rates are currently at 6.02%. Combined with a current stock volatility of approximately 42%‚ this allows each option to be valued at approximately $4.93. At this amount‚ Ms. Jameson’s options would be presently worth $14‚790 were she to sell them. Where she to hold them instead
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