Case of Cephalon Based on the contract‚ the strike 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%
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of financial options‚ you have been asked to prepare a brief report that firm’s executives can use to gain a cursory understanding of the topic. To begin‚ you gathered some outside materials on the subject and used these materials to draft a list of pertinent questions that need to be answered. In fact‚ one possible approach to the report is to use a question-and-answer format. Now that the questions have been drafted‚ you have to develop the answers. a. What is a financial option? What is the
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approved by the FDA‚ would you recommend that Cephalon follows a strategy of making an immediate onetime payment to purchase all of the rights to this drug rather than making a stream of payments under the milestone payment/interim license/purchase option agreement that was in place? Explain your reasoning. Answer: If Myotrophin is approved‚ I will recommend Cephalon to make a onetime payment to purchase the rights to this drug. First of all‚ we want to find out if we are capable to raise this large
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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
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CITIC TOWER II: THE REAL OPTION Suffolk University – FIN- 881 Fall 2014 Name: Abdelrhman El Refaiy Larry Young the Chairman of Citic Pacific Limited has to make a decision to develop a new project under the name Citic Tower II. The development project that will take place in Hong Kong is expected to leave the company with $60 MM in losses as per NPV analysis. Citic’s property development team has set rigid assumptions to build their NPV model that estimated net positive cash inflows at $1.54 billion
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offered to key employees should at or above the market price‚ because the stock-option plan should be attractive to these employees. 3. I think the price might be below‚ equal‚ or above the market price. The length of time would be longer than the other two kinds of warrants. The length of time will increase as long as the exercise price increases. c. 1. Include a description of the stock being offered for sale; the option price; the time period during which the rights may be exercised; and the number
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unlimited risk strategy in options trading that involves selling equal number of out-of-the-money calls and puts of the same underlying security‚ strike price and expiration date while owning the underlying stock. Covered Combination Construction Long 100 Shares Sell 1 OTM Call Sell 1 OTM Put Limited Profit Potential Maximum gain for the covered combination is achieved when the underlying stock price on expiration date is trading at or above the strike price of the call options sold. This is the price
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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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questions in the assignment on your own. The purpose of the assignment is to help you become more familiar with pricing options‚ using a specifically designed piece of software. The pricing of options is a very technical area‚ and most of us do not have the technical expertise to price options from first principals. Therefore in your working lives‚ if you do need to price options‚ then it will most likely be done for you via software. The software we will be using is called ‘DerivaGem’‚ which
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