SHARE OPTIONS IN THE STOCKMARKET The principal business of stock exchanges is trade in physical shares‚ but they also trade in share options in the major stocks. An option gives the holder the right to buy or sell a share at a predetermined price at some point in the future – for example‚ the right to buy shares in three months’ time at a price set today. An option which gives the buyer the right to buy a share is a “call” option. An option which gives the buyer the right to sell a share is a
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International Capital Market (3IM) Lecture 9 Option versus Stock Investments • Could a call option strategy be preferable to a direct stock purchase? • Suppose you think a stock‚ currently selling for $100‚ will appreciate. • A 6-month call costs $10 (contract size is 100 shares). • You have $10‚000 to invest. • Strategy A: Invest entirely in stock. Buy 100 shares‚ each selling for $100. • Strategy B: Invest entirely in at-the-money call options. Buy 1‚000 calls‚ each selling for $10. (This would
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Compensation and benefits packages are the talk of the century. Whether it is benefits offered by the government‚ an insurance company‚ the local supermarket‚ a fortune 500 company‚ a logistic firm‚ retail‚ or even being the owner of a business‚ this topic is wide spread. Employees want to know what they will get in exchange for their working for a company. The cost of dental‚ vision‚ and health benefits are increasing higher than ever before and having a great benefits package will surely
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Executive Stock Options and IPO Underpricing Michelle Lowry• Smeal College of Business Penn State University E-mail: mlowry@psu.edu Phone: (814) 865-1483 Kevin J. Murphy Marshall School of Business University of Southern California E-mail: kjmurphy@usc.edu Phone: (213) 740-6553 July 31‚ 2006 Abstract In about one-third of US IPOs between 1996 and 2000‚ executives received stock options with an exercise price set equal to the IPO offer price (rather than a price determined by the market)
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FASB‚ compensation plans include all arrangements by which employees receive shares of stock or other equity instruments of the employer or the employer incurs liabilities to employees in amounts based on the price of the employer’s stock. Compensation cost should be measured at the grant date based on the value of the award and is recognized over the service period‚ which is usually the vesting period‚ under the fair value based method. Compensation costs are recognized for other types of stock-based
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inherent in the option investment strategies‚ please perform the following analyses for call and put options on Lotus’s common stock that mature in February 1994 and that have an exercise price of $55 per share. a. Compute net profits and losses per share (actual dollar profit and losses‚ not rates of return) at expiration (February 19‚ 1994) for the following investment strategies: Buying a call option on Lotus’s stock; Writing a call option on Lotus’s common stock; Buying a put option on Lotus’s
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JAMESON PRODUCTION/ LOGISTICS Jameson Irish Whiskey is world renowned for its reliably smooth and accessible taste. One of the key reasons for the extraordinary success of Jameson Irish Whiskey around the globe is its super-smooth‚ perfectly balanced taste. This can be attributed to Dave Quinn‚ Master of Whiskey Science at the Midleton Single Distillery. Dave ensures that all of the key Jameson elements come together to create the renowned and unmistakable Jameson taste. You could say Dave has
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Stock Option and Ethics Carol Berry ACC201 Principles of Financial Accounting Instructor: David Miller August 1‚ 2011 Stock Option and Ethics In today’s corporate world stock options makes up and is increasingly dominates CEO pay packages. CEO’s and top level executives are paid in a variety of different ways and stock options are just one of the ways that they get paid. CEO’s and executives have skills and responsibilities that allow directors of companies to pay these executives an extremely
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Design and Justify an Optimal Compensation Scheme to Reward Bank CEO’s (2500words) i) Study the principal-agent theory to explain the key requirements that an optimal pay-contract should possibly meet and ii) Apply this to the financial sector in order to come up with an efficient compensation contract for bank CEO’s. Introduction The 2008 collapse of Lehman Brothers precipitated the sub-prime crisis‚ the collapse of major banks and a global economic crisis that resulted in a worldwide recession
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Valuing Introduction Currently Wal-Mart serves customers and members more than 200 million times per week. Wal-Mart operates under 69 different banners in 27 countries. With fiscal year 2012 sales of approximately $444 billion‚ Wal-Mart employs 2.2 million associates worldwide. In 2005 for this case the sales were approximately $285 billion and operated 4‚000 stores worldwide. Valuations Dividend Discount Method (DDM): The DDM is a procedure for valuing the price of a stock by using predicted
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