Structured Finance. Equity
|
|
|
- Coleen Fox
- 6 years ago
- Views:
Transcription
1 Structured Finance-1 Structured Finance: Equity Prof. Ian Giddy New York University Structured Finance Asset-backed securitization Corporate financial restructuring Structured financing techniques Copyright 2002 Ian H. Giddy Structured Finance 2
2 Structured Finance-2 When Debt and Equity are Not Enough Assets of of future cash flows Liabilities Debt Contractual int. int. & principal No No upside upside Senior Senior claims claims Control via via restrictions Equity Residual payments Upside and and downside Residual claims claims Voting Voting control rights rights Copyright 2002 Ian H. Giddy Structured Finance 3 When Debt and Equity are Not Enough Assets of of future cash flows Liabilities Debt Contractual int. int. & principal No No upside upside Senior Senior claims claims Control via via restrictions Equity Residual payments Upside and and downside Residual claims claims Voting Voting control rights rights Alternatives Collateralized Asset-securitized Project financing Preferred Warrants Convertible Copyright 2002 Ian H. Giddy Structured Finance 4
3 Structured Finance-3 Case Studies Ban Pu Convertible Bond; Keppel T&T Convertible; Singapore Warrant Bonds; Lyons; Endesa Copyright 2002 Ian H. Giddy Structured Finance 5 A Day in the Life of the Eurobond Market Examine the deals Which were structured financing? Why were each done in that particular form? What determines the pricing? Can you break the hybrids into their component parts? Copyright 2002 Ian H. Giddy Structured Finance 6
4 Structured Finance-4 A Day in the Life... Copyright 2002 Ian H. Giddy Structured Finance 7 Equity-Linked Bonds Bonds with warrants Convertible Bonds Index-linked Bonds These are all example of hybrid bonds and should be priced by decomposition Copyright 2002 Ian H. Giddy Structured Finance 8
5 Structured Finance-5 Convertibles V a l u e o f C on v e rt i b l e B o n d ($) 0 Market Market Premium Straight Bond Conversion Price Per Share of Common Stock Copyright 2002 Ian H. Giddy Structured Finance 9 Warrants V a l u e o f W ar r a n t Market Market Premium Theoretical ($) 0 Price Per Share of Common Stock ($) Copyright 2002 Ian H. Giddy Structured Finance 10
6 Structured Finance-6 Index-Linked PRINCIPAL REPAYMENT Copyright 2002 Ian H. Giddy Structured Finance 11 Stock-Purchase Warrants Warrants are usually detachable and trade on the securities exchanges Warrants are often added to a large debt issue as sweeteners to enhance the marketability of the issue Exercise price Warrants usually have a limited life of about 10 years or less Warrants differ from rights and convertibles Copyright 2002 Ian H. Giddy Structured Finance 12
7 Structured Finance-7 The Implied Price of an Attached Warrant To determine the implied price of an attached warrant, the implied price of all warrants attached to a bond must be determined Implied price of all warrants = price of bond with warrants attached - the straight bond value (of similar-risk bonds) The impled price of a single warrant is the implied price of all warrants divided by the number of warrants attached to each bond Copyright 2002 Ian H. Giddy Structured Finance 13 The of Warrants A warrant has a theoretical value at any point in time prior to its expiration date The theoretical value can be calculated as: TVW = (P o - E) x N WHERE: TVW = Theoretical value of a warrant P o = Current market price of one share of common stock E = Exercise price of the warrant N = Number of shares of common stock obtainable with one warrant Copyright 2002 Ian H. Giddy Structured Finance 14
8 Structured Finance-8 Sony Warrants Sony Electronics has outstanding warrants exercisable at Yen400/share that entitle holders to purchase three shares of common stock per warrant. If Sony s common stock is currently selling for Y45/share, the TVW = TVW = (Y45 - Y40) x 3 = Y15 The market value of a warrant is generally greater than its theoretical value; the difference, known as the warrant premium is due to investor expectations and opportunities for further gain before expiration. Copyright 2002 Ian H. Giddy Structured Finance 15 s and Warrant Premium Copyright 1994, HarperCollins Publishers V al u e o f W ar r a n t Market Market Premium Theoretical ($) 0 Price Per Share of Common Stock ($) Copyright 2002 Ian H. Giddy Structured Finance 16
9 Structured Finance-9 Option Pricing Option Price Time value depends on on Time Volatility Distance from the strike price Option Price = Intrinsic value + Time value Underlying Price Copyright 2002 Ian H. Giddy Structured Finance 17 Option Pricing Model ENTER THESE DATA: ================= -> FUTURES PRICE > STRIKE PRICE > TIME IN DAYS 300 -> INTEREST RATE 7 -> STD DEVIATION 15 CALL PRICE IS PUT PRICE IS CALL OPTION PRICE FUTURES PRICE Copyright 2002 Ian H. Giddy Structured Finance 18
10 Structured Finance-10 of Call Option FUTURES PRICE STRIKE SHADED AREA: Probability distribution of the log of the futures price on the expiration date for values above the strike. INTRINSIC VALUE TIME VALUE EXPECTED VALUE OF PROFIT GIVEN EXERCISE Copyright 2002 Ian H. Giddy Structured Finance 19 Black-Scholes Option Valuation C o = S o N(d 1 ) - Xe -rt N(d 2 ) d 1 = [ln(s o /X) + (r + σ 2 /2)T] / (σ T 1/2 ) d 2 = d 1 - (σ T 1/2 ) where C o = Current call option value. S o = Current stock price N(d) = probability that a random draw from a normal dist. will be less than d. Copyright 2002 Ian H. Giddy Structured Finance 20
11 Structured Finance-11 Convertible Bonds Bond may be converted into stock The Conversion Ratio is the number of shares of common stock that can be received in exchange for each convertible security The Conversion Price is the per share common stock price at which the exchange effectively takes place Copyright 2002 Ian H. Giddy Structured Finance 21 Convertibles The Conversion Period is a limited time within which a security may be exchanged for common stock The Conversion is the market value of the security based upon the conversion ratio times the current market price of the firm's common stock Earnings effects: Firms must report Primary EPS, treating all contingent securities that derive their value from their conversion privileges or common stock characteristics as common stock Firms must report Fully Diluted EPS treating all contingent securities as common stock Copyright 2002 Ian H. Giddy Structured Finance 22
12 Structured Finance-12 Example: Hyundai Euroconvertible If Hyundai issues a Eurobond with a $1,000 par value that is convertible at $40 per share of common stock, the conversion ratio = $1,000 = 25 $40 If Hyundai had stated the conversion ratio at 20, the conversion price = $1,000 = $50 20 Copyright 2002 Ian H. Giddy Structured Finance 23 Financing With Convertibles Motives for using convertibles include: It is a deferred sale of common stock that decreases the dilution of both ownership and earnings They can be used as a sweetener for financing They can be sold at a lower interest rate than nonconvertibles They have far fewer restrictive covenants than nonconvertibles It provides a temporarily cheap source of funds (assuming bonds) for financing projects Most convertibles have a call feature that enables the issuer to force conversion when the price of the common stock rises above the conversion price Copyright 2002 Ian H. Giddy Structured Finance 24
13 Structured Finance-13 Determining the of a Convertible Bond There are three values associated with a convertible bond: Straight Bond is the price at which the bond would sell in the market without the conversion feature The Conversion is the product of the current market price of stock times the conversion ratio of the bond The Market is the straight or conversion value plus a market premium based upon future (expected) stock price movements that will enhance the value of the conversion feature Copyright 2002 Ian H. Giddy Structured Finance 25 Siam Cement Siam Cement sold a $1,000 par value, 20-year convertible bond with a 12% coupon. A straight bond would have been sold with a 14% coupon. The conversion ratio is 20 Straight Bond $120 x (PVIFA 14%,20 ) + $1,000 x (PVIF 14%,20 ) = $120 x (6.623) + $1,000 x (.073) = $ Conversion at various market prices of stock Stock Price Conversion $30 $ (Conversion Price) 1,000 (Par ) 60 1, , ,600 The straight bond value is the minimum price at which the convertible bond would be traded Copyright 2002 Ian H. Giddy Structured Finance 26
14 Structured Finance-14 s and Market Premium V al u e o f C on v e rt i b l e Market Market Premium Straight Bond Conversion B o n d ($) 0 Price Per Share of Common Stock Copyright 2002 Ian H. Giddy Structured Finance 27 Breaking Down a Convertible: Kodak At the end of 2001, Kodak (EK) had a 5.25% convertible bond, coming due in 2009, trading at $1300. The face value was $1000. It also had straight bonds, with the same maturity, trading in December 2001 at a yield of 8.4%. What s the straight bond component worth? What s the convertible option worth? Assume the conversion ratio is 24, and Kodak stock is priced at $51. How would you determine whether the investor is overpaying? Copyright 2002 Ian H. Giddy Structured Finance 28
15 Structured Finance-15 Breaking Down a Convertible Coupon rate on Convertible Bond = 8.25% Market Interest Rate on Straight Bond of same Risk = 8.40% Price of Convertible Bond = 1400 Maturity of Convertible Bond = 8 of Straight Bond Portion = $ of Conversion Option = $ Copyright 2002 Ian H. Giddy Structured Finance 29 Case Study: Banpu Convertible How did this work? Why did Banpu use this technique? Why did investors buy it? Copyright 2002 Ian H. Giddy Structured Finance 30
16 Structured Finance-16 Banpu Convertible Huh? Copyright 2002 Ian H. Giddy Structured Finance 31 Thai Time Copyright 2002 Ian H. Giddy Structured Finance 32
17 Structured Finance-17 Motivations for Issuing Hybrid Bonds Company has a view There are constraints on what the company can issue The company can arbitrage to save money Always ask: given my goal, is there an alternative way of achieving the same effect (e.g., using derivatives?) Copyright 2002 Ian H. Giddy Structured Finance 33 Why Use a Hybrid? Motivations for Hybrids Linked to business risk Driven by investor needs Linked to market risk Cannot hedge with derivatives Company hedges Company does not hedge Debt or equity are Not good enough Copyright 2002 Ian H. Giddy Structured Finance 34
18 Structured Finance-18 Contact Info Ian H. Giddy NYU Stern School of Business Tel ; Fax Copyright 2002 Ian H. Giddy Structured Finance 39
SIM/NYU The Job of the CFO. Hybrid Securities. Prof. Ian Giddy. New York University
Hybrid Securities-1 SIM/NYU The Job of the CFO Hybrid Securities Prof. Ian Giddy New York University The Agenda What determines the optimal mix of debt and equity for a company? How does altering the mix
Risk Management Using Derivatives Securities
Risk Management Using Derivatives Securities 1 Definition of Derivatives A derivative is a financial instrument whose value is derived from the price of a more basic asset called the underlying asset.
Valuation for Ventures-1. Prof. Ian Giddy. New York University. What s a Company Worth? Alternative Models
Valuation for Ventures-1 Valuation of New Ventures Prof. Ian Giddy New York University What s a Company Worth? Alternative Models The options approach Option to expand Option to abandon Creation of key
IBM Designing Debt Prof. Ian Giddy New York University
IBM Designing Debt Prof. Ian Giddy New York University First Principles Invest in projects that yield a return greater than the minimum acceptable hurdle rate. The hurdle rate should be higher for riskier
Distress Valuation. Prof. Ian Giddy New York University. What s Marvel worth? Who s winning? Who s losing?
Distress Valuation-1 Distress Valuation Prof. Ian Giddy New York University What s Marvel worth? Who s winning? Who s losing? Distress Valuation-2 When Default Threatens, Value the Company Highest Valuation
Options Markets: Introduction
17-2 Options Options Markets: Introduction Derivatives are securities that get their value from the price of other securities. Derivatives are contingent claims because their payoffs depend on the value
Review. Prof. Ian Giddy
Portfolio Management/1 New York University Stern School of Business Review Prof. Ian Giddy New York University Topics The Financial Markets Time Value of Money and Yields Money and Bond Markets Risk and
Option pricing models
Option pricing models Objective Learn to estimate the market value of option contracts. Outline The Binomial Model The Black-Scholes pricing model The Binomial Model A very simple to use and understand
Options (2) Class 20 Financial Management,
Options (2) Class 20 Financial Management, 15.414 Today Options Option pricing Applications: Currency risk and convertible bonds Reading Brealey and Myers, Chapter 20, 21 2 Options Gives the holder the
Terminology of Convertible Bonds
Bellerive 241 P.o. Box CH-8034 Zurich info@fam.ch www.fam.ch T +41 44 284 24 24 Terminology of Convertible Bonds Fisch Asset Management Terminology of Convertible Bonds Seite 2 28 ACCRUED INTEREST 7 ADJUSTABLE-RATE
Valuing Put Options with Put-Call Parity S + P C = [X/(1+r f ) t ] + [D P /(1+r f ) t ] CFA Examination DERIVATIVES OPTIONS Page 1 of 6
![Valuing Put Options with Put-Call Parity S + P C = [X/(1+r f ) t ] + [D P /(1+r f ) t ] CFA Examination DERIVATIVES OPTIONS Page 1 of 6](/thumbs/77/75506899.jpg "Valuing Put Options with Put-Call Parity S + P C = [X/(1+r f ) t ] + [D P /(1+r f ) t ] CFA Examination DERIVATIVES OPTIONS Page 1 of 6")
DERIVATIVES OPTIONS A. INTRODUCTION There are 2 Types of Options Calls: give the holder the RIGHT, at his discretion, to BUY a Specified number of a Specified Asset at a Specified Price on, or until, a
AFM 371 Winter 2008 Chapter 25 - Warrants and Convertibles
AFM 371 Winter 2008 Chapter 25 - Warrants and Convertibles 1 / 20 Outline Background Warrants Convertibles Why Do Firms Issue Warrants And Convertibles? 2 / 20 Background when firms issue debt, they sometimes
Corporate Financial Restructuring
Corporate Financial Restructuring-1 Corporate Financial Restructuring Prof. Ian Giddy New York University Corporate Financial Restructuring Corporate restructuring business and financial Structured financing
Equity Warrant Difinitin and Pricing Guide
Difinitin and Pricing Guide John Smith FinPricing Summary Equity Warrant Introduction The Use of Equity Warrants Equity Warrant Payoffs Valuation Valuation Model Assumption A Real World Example Equity
The Global Bond Market. Prof. Ian GIDDY. The International Capital Market
Giddy The Global Bond Market /1 The Global Bond Market Prof. Ian GIDDY Stern School of Business New York University The International Capital Market International bank financing Eurobonds, foreign bonds
CHAPTER 10 OPTION PRICING - II. Derivatives and Risk Management By Rajiv Srivastava. Copyright Oxford University Press
CHAPTER 10 OPTION PRICING - II Options Pricing II Intrinsic Value and Time Value Boundary Conditions for Option Pricing Arbitrage Based Relationship for Option Pricing Put Call Parity 2 Binomial Option
Econ 174 Financial Insurance Fall 2000 Allan Timmermann. Final Exam. Please answer all four questions. Each question carries 25% of the total grade.
Econ 174 Financial Insurance Fall 2000 Allan Timmermann UCSD Final Exam Please answer all four questions. Each question carries 25% of the total grade. 1. Explain the reasons why you agree or disagree
Final Exam. Please answer all four questions. Each question carries 25% of the total grade.
Econ 174 Financial Insurance Fall 2000 Allan Timmermann UCSD Final Exam Please answer all four questions. Each question carries 25% of the total grade. 1. Explain the reasons why you agree or disagree
B. Combinations. 1. Synthetic Call (Put-Call Parity). 2. Writing a Covered Call. 3. Straddle, Strangle. 4. Spreads (Bull, Bear, Butterfly).
1 EG, Ch. 22; Options I. Overview. A. Definitions. 1. Option - contract in entitling holder to buy/sell a certain asset at or before a certain time at a specified price. Gives holder the right, but not
Copyright 2009 Pearson Education Canada
CHAPTER NINE Qualitative Questions 1. What is the difference between a call option and a put option? For an option buyer, a call option is the right to buy, while a put option is the right to sell. For
CHAPTER 27: OPTION PRICING THEORY
CHAPTER 27: OPTION PRICING THEORY 27-1 a. False. The reverse is true. b. True. Higher variance increases option value. c. True. Otherwise, arbitrage will be possible. d. False. Put-call parity can cut
MTP_Final_Syllabus 2016_Jun2017_ Set 1 Paper 14 Strategic Financial Management
Paper 14 Strategic Financial Management Academics Department, The Institute of Cost Accountants of India, (Statutory body under an Act of Parliament) Page 1 Paper 14 Strategic Financial Management Full
The Securitization Process/1
The Securitization Process/1 Asset-Backed Securities The Securitization Process Prof. Ian Giddy Stern School of Business New York University Asset-Backed Securities The basic idea What s needed? The technique
Asset-Backed Securities. Thai Cars. Prof. Ian Giddy. Stern School of Business New York University
/1 Asset-Backed Securities Prof. Ian Giddy Stern School of Business New York University Case Study: How was the transfer of assets and funds structured? Where is the SPV, and what are its assets and liabilities?
Chapter 16: Dilutive Securities and Earnings per Share
Intermediate Accounting, 11th ed. Kieso, Weygandt, and Warfield Chapter 16: Dilutive Securities and Earnings per Share Prepared by Jep Robertson and Renae Clark New Mexico State University Chapter 16:
Appendix A Financial Calculations
Derivatives Demystified: A Step-by-Step Guide to Forwards, Futures, Swaps and Options, Second Edition By Andrew M. Chisholm 010 John Wiley & Sons, Ltd. Appendix A Financial Calculations TIME VALUE OF MONEY
CHAPTER 16. Dilutive Securities and Earnings Per Share 1, 2, 3, 4, 5, 6, 7, Warrants and debt. 3, 8, 9 4, 5 7, 8, 9, 10, 29
CHAPTER 16 Dilutive Securities and Earnings Per Share ASSIGNMENT CLASSIFICATION TABLE (BY TOPIC) Topics Questions Brief Exercises Exercises Problems Concepts for Analysis 1. Convertible debt and preference
5. You purchase one IBM September 160 put contract for a premium of $2.62. What is your maximum possible profit? (See Figure 15.1.
OPEN QUESTIONS 4. Turn back to Figure 15.1, which lists the 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 January
Appendix: Basics of Options and Option Pricing Option Payoffs
Appendix: Basics of Options and Option Pricing An option provides the holder with the right to buy or sell a specified quantity of an underlying asset at a fixed price (called a strike price or an exercise
Review of Derivatives I. Matti Suominen, Aalto
Review of Derivatives I Matti Suominen, Aalto 25 SOME STATISTICS: World Financial Markets (trillion USD) 2 15 1 5 Securitized loans Corporate bonds Financial institutions' bonds Public debt Equity market
Asset-Backed Securities: Managing the Credit Risks
Managing the Credit Risks/1 Asset-Backed Securities Asset-Backed Securities: Managing the Credit Risks Prof. Ian Giddy Stern School of Business New York University Asset-Backed Securities: Managing the
Global Financial Management. Option Contracts
Global Financial Management Option Contracts Copyright 1997 by Alon Brav, Campbell R. Harvey, Ernst Maug and Stephen Gray. All rights reserved. No part of this lecture may be reproduced without the permission
FINANCIAL MATHEMATICS WITH ADVANCED TOPICS MTHE7013A
UNIVERSITY OF EAST ANGLIA School of Mathematics Main Series UG Examination 2016 17 FINANCIAL MATHEMATICS WITH ADVANCED TOPICS MTHE7013A Time allowed: 3 Hours Attempt QUESTIONS 1 and 2, and THREE other
Summary of ASPE 3856 Financial Instruments
Purpose and Scope This section establishes standards for: Recognizing and measuring financial assets, financial liabilities and specified contracts to buy or sell non-financial items; The classification
Attempt QUESTIONS 1 and 2, and THREE other questions. Do not turn over until you are told to do so by the Invigilator.
UNIVERSITY OF EAST ANGLIA School of Mathematics Main Series UG Examination 2016 17 FINANCIAL MATHEMATICS MTHE6026A Time allowed: 3 Hours Attempt QUESTIONS 1 and 2, and THREE other questions. Notes are
Chapter 17. Options and Corporate Finance. Key Concepts and Skills
Chapter 17 Options and Corporate Finance Prof. Durham Key Concepts and Skills Understand option terminology Be able to determine option payoffs and profits Understand the major determinants of option prices
A. Dilutive Securities: Securities which are not common stock in form but enable their holders to obtain common stock upon exercise or conversion.
Chapter 17 Dilutive Securities and Earnings Per Share LECTURE OUTLINE The material in this chapter can be covered in three or four class sessions. Students generally have not been exposed to the types
Mathematical Finance Why would you need to know what an option is? Presenters Ron Grosz Patricia Parker-Davis
Mathematical Finance Why would you need to know what an option is? Presenters Ron Grosz Patricia Parker-Davis Employee Stock Options Some companies offer employees special stock options depending upon
LECTURE 12. Volatility is the question on the B/S which assumes constant SD throughout the exercise period - The time series of implied volatility
LECTURE 12 Review Options C = S e -δt N (d1) X e it N (d2) P = X e it (1- N (d2)) S e -δt (1 - N (d1)) Volatility is the question on the B/S which assumes constant SD throughout the exercise period - The
15 American. Option Pricing. Answers to Questions and Problems
15 American Option Pricing Answers to Questions and Problems 1. Explain why American and European calls on a nondividend stock always have the same value. An American option is just like a European option,
MARLIN BUSINESS SERVICES CORP.
Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly
Midterm Review. P resent value = P V =
JEM034 Corporate Finance Winter Semester 2017/2018 Instructor: Olga Bychkova Midterm Review F uture value of $100 = $100 (1 + r) t Suppose that you will receive a cash flow of C t dollars at the end of
OPTIONS. Options: Definitions. Definitions (Cont) Price of Call at Maturity and Payoff. Payoff from Holding Stock and Riskfree Bond
OPTIONS Professor Anant K. Sundaram THUNERBIR Spring 2003 Options: efinitions Contingent claim; derivative Right, not obligation when bought (but, not when sold) More general than might first appear Calls,
Pricing theory of financial derivatives
Pricing theory of financial derivatives One-period securities model S denotes the price process {S(t) : t = 0, 1}, where S(t) = (S 1 (t) S 2 (t) S M (t)). Here, M is the number of securities. At t = 1,
Chapter 5. Risk Handling Techniques: Diversification and Hedging. Risk Bearing Institutions. Additional Benefits. Chapter 5 Page 1
Chapter 5 Risk Handling Techniques: Diversification and Hedging Risk Bearing Institutions Bearing risk collectively Diversification Examples: Pension Plans Mutual Funds Insurance Companies Additional Benefits
PAPER 2 : STRATEGIC FINANCIAL MANAGEMENT. Answers all the Questions
Question 1 (a) (b) PAPER : STRATEGIC FINANCIAL MANAGEMENT Answers all the Questions Following information is available for X Company s shares and Call option: Current share price Option exercise price
ASPE AT A GLANCE. Section Financial Instruments
ASPE AT A GLANCE Section 3856 - Financial Instruments December 2014 Section 3856 Financial Instruments Effective Date Fiscal years beginning on or after January 1, 2011 1 SCOPE Applies to all financial
University of Waterloo Final Examination
University of Waterloo Final Examination Term: Fall 2007 Student Name KEY UW Student ID Number Course Abbreviation and Number AFM 372 Course Title Math Managerial Finance 2 Instructor Alan Huang Date of
Chapter 9 - Mechanics of Options Markets
Chapter 9 - Mechanics of Options Markets Types of options Option positions and profit/loss diagrams Underlying assets Specifications Trading options Margins Taxation Warrants, employee stock options, and
Asset-Backed Financing: Asian Applications. Selected Asian Case Studies. Dah Sing Thai Cars Hong Kong Credit Cards
Asian Applications/1 IBBM Financing with Asset-Backed Securities Asset-Backed Financing: Asian Applications Prof. Ian Giddy Stern School of Business New York University Selected Asian Case Studies Dah
The Black-Scholes-Merton Model
Normal (Gaussian) Distribution Probability Density 0.5 0. 0.15 0.1 0.05 0 1.1 1 0.9 0.8 0.7 0.6? 0.5 0.4 0.3 0. 0.1 0 3.6 5. 6.8 8.4 10 11.6 13. 14.8 16.4 18 Cumulative Probability Slide 13 in this slide
Lecture 15. Concepts of Black-Scholes options model. I. Intuition of Black-Scholes Pricing formulas
Lecture 15 Concepts of Black-Scholes options model Agenda: I. Intuition of Black-Scholes Pricing formulas II. III. he impact of stock dilution: an example of stock warrant pricing model he impact of Dividends:
UNIVERSITY OF AGDER EXAM. Faculty of Economicsand Social Sciences. Exam code: Exam name: Date: Time: Number of pages: Number of problems: Enclosure:
UNIVERSITY OF AGDER Faculty of Economicsand Social Sciences Exam code: Exam name: Date: Time: Number of pages: Number of problems: Enclosure: Exam aids: Comments: EXAM BE-411, ORDINARY EXAM Derivatives
Derivatives Questions Question 1 Explain carefully the difference between hedging, speculation, and arbitrage.
Derivatives Questions Question 1 Explain carefully the difference between hedging, speculation, and arbitrage. Question 2 What is the difference between entering into a long forward contract when the forward
Advanced Corporate Finance. 8. Long Term Debt
Advanced Corporate Finance 8. Long Term Debt Objectives of the session 1. Understand the role of debt financing and the various elements involved 2. Analyze the value of bonds with embedded options 3.
Any asset that derives its value from another underlying asset is called a derivative asset. The underlying asset could be any asset - for example, a
Options Week 7 What is a derivative asset? Any asset that derives its value from another underlying asset is called a derivative asset. The underlying asset could be any asset - for example, a stock, bond,
Two Types of Options
FIN 673 Binomial Option Pricing Professor Robert B.H. Hauswald Kogod School of Business, AU Two Types of Options An option gives the holder the right, but not the obligation, to buy or sell a given quantity
Rs C. Details related to Employee Stock Option Schemes (ESOS) of the Company: Sr. No. Particulars ESOS ESOS- 2013
Disclosure pursuant to Regulation 14 of Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014 as on 31st March, 2015: A. Relevant disclosures in terms of the 'Guidance
Rifco Inc. Consolidated Interim Financial Statements (unaudited) For the three and six months ended September 30, 2018 and 2017
Consolidated Interim Financial Statements (unaudited) For the three and six months ended September 30, 2018 and 2017 1 Table of Contents For the three and six months ended September 30, 2018 and 2017 Consolidated
CHAPTER 17 OPTIONS AND CORPORATE FINANCE
CHAPTER 17 OPTIONS AND CORPORATE FINANCE Answers to Concept Questions 1. A call option confers the right, without the obligation, to buy an asset at a given price on or before a given date. A put option
ABS: The Hidden Risks
Asset-Backed Securities ABS: The Hidden Risks Prof. Ian Giddy Stern School of Business New York University Hidden Risks and Rewards Synthetic CLOs Waterfalls Whole business securitization Future flow ABS
FINANCIAL MATHEMATICS WITH ADVANCED TOPICS MTHE7013A
UNIVERSITY OF EAST ANGLIA School of Mathematics Main Series UG Examination 2016 17 FINANCIAL MATHEMATICS WITH ADVANCED TOPICS MTHE7013A Time allowed: 3 Hours Attempt QUESTIONS 1 and 2, and THREE other
UNITED STATES SECURITIES AND EXCHANGE COMMISSION. Washington, D.C FORM 10-K
Form 10-K http://sec.gov/archives/edgar/data/78003/000119312511048877/d10k.htm Page 1 of 41 6/21/2011 10-K 1 d10k.htm FORM 10-K Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington,
JEM034 Corporate Finance Winter Semester 2017/2018
JEM034 Corporate Finance Winter Semester 2017/2018 Lecture #5 Olga Bychkova Topics Covered Today Risk and the Cost of Capital (chapter 9 in BMA) Understading Options (chapter 20 in BMA) Valuing Options
Portfolio Management
Portfolio Management 010-011 1. Consider the following prices (calculated under the assumption of absence of arbitrage) corresponding to three sets of options on the Dow Jones index. Each point of the
Attempt QUESTIONS 1 and 2, and THREE other questions. Do not turn over until you are told to do so by the Invigilator.
UNIVERSITY OF EAST ANGLIA School of Mathematics Main Series UG Examination 2016 17 FINANCIAL MATHEMATICS MTHE6026A Time allowed: 3 Hours Attempt QUESTIONS 1 and 2, and THREE other questions. Notes are
Answer to MTP_Final_Syllabus 2016_Jun2017_Set 1 Paper 14 - Strategic Financial Management
Paper 14 - Strategic Financial Management Academics Department, The Institute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 1 Paper 14 - Strategic Financial Management Full
Consolidated Interim Financial Statements
Consolidated Interim Financial Statements As at March 31, 2018 and for the three months ended March 31, 2018 and 2017 As at (thousands of Canadian dollars) ASSETS Current assets CONSOLIDATED INTERIM STATEMENTS
Financial Markets & Risk
Financial Markets & Risk Dr Cesario MATEUS Senior Lecturer in Finance and Banking Room QA259 Department of Accounting and Finance c.mateus@greenwich.ac.uk www.cesariomateus.com Session 3 Derivatives Binomial
A NEW APPROACH TO MERTON MODEL DEFAULT AND PREDICTIVE ANALYTICS WITH APPLICATIONS TO RECESSION ECONOMICS TOMMY LEWIS
A NEW APPROACH TO MERTON MODEL DEFAULT AND PREDICTIVE ANALYTICS WITH APPLICATIONS TO RECESSION ECONOMICS TOMMY LEWIS BACKGROUND/MOTIVATION Default risk is the uncertainty surrounding how likely it is that
EITF ABSTRACTS. Title: Application of Issue No to Certain Convertible Instruments. Dates Discussed: November 15 16, 2000; January 17 18, 2001
EITF ABSTRACTS Issue No. 00-27 Title: Application of Issue No. 98-5 to Certain Convertible Instruments Dates Discussed: November 15 16, 2000; January 17 18, 2001 References: FASB Statement No. 3, Reporting
Lecture Note 8 of Bus 41202, Spring 2017: Stochastic Diffusion Equation & Option Pricing
Lecture Note 8 of Bus 41202, Spring 2017: Stochastic Diffusion Equation & Option Pricing We shall go over this note quickly due to time constraints. Key concept: Ito s lemma Stock Options: A contract giving
Chapter 14. Exotic Options: I. Question Question Question Question The geometric averages for stocks will always be lower.
Chapter 14 Exotic Options: I Question 14.1 The geometric averages for stocks will always be lower. Question 14.2 The arithmetic average is 5 (three 5s, one 4, and one 6) and the geometric average is (5
Advanced Corporate Finance. 5. Options (a refresher)
Advanced Corporate Finance 5. Options (a refresher) Objectives of the session 1. Define options (calls and puts) 2. Analyze terminal payoff 3. Define basic strategies 4. Binomial option pricing model 5.
Chapter 14 Exotic Options: I
Chapter 14 Exotic Options: I Question 14.1. The geometric averages for stocks will always be lower. Question 14.2. The arithmetic average is 5 (three 5 s, one 4, and one 6) and the geometric average is
Financial Instruments: Derivatives KPMG. All rights reserved. 1
Financial Instruments: Derivatives 2003 KPMG. All rights reserved. 1 1. Introduction Financial Risk Management data technology strategy Risk tolerance operations Management Infrastructure autorisation
DISCLAIMER. The Institute of Chartered Accountants of India
DISCLAIMER The Suggested Answers hosted in the website do not constitute the basis for evaluation of the students answers in the examination. The answers are prepared by the Faculty of the Board of Studies
Financial Instruments: Derivatives
Financial Instruments: Derivatives KPMG. All rights reserved. 1 1. Introduction Financial Risk Management data technology strategy Risk tolerance operations Management Infrastructure autorisation people
FASB Emerging Issues Task Force
EITF Issue No. 07-2 FASB Emerging Issues Task Force Issue No: 07-2 Title: Accounting for Convertible Debt Instruments That Are Not Subject to the Guidance in Paragraph 12 of APB Opinion No. 14, Accounting
In general, the value of any asset is the present value of the expected cash flows on
ch05_p087_110.qxp 11/30/11 2:00 PM Page 87 CHAPTER 5 Option Pricing Theory and Models In general, the value of any asset is the present value of the expected cash flows on that asset. This section will
LESTI-bm14-Appendix C. Staff Summary of GAAP for Convertible Instruments
Staff Summary of GAAP for Convertible Instruments 1. Current GAAP for convertible instruments is included in Subtopic 470-20, Debt Debt with Conversion and Other Options. There is a significant amount
Consolidated Financial Statements. For the years ended December 31, 2017 and 2016
Consolidated Financial Statements For the years ended December 31, 2017 and 2016 TABLE OF CONTENTS Management s Report 3 Page Independent Auditor s Report 4 Consolidated Statements of Operations and Comprehensive
Credit Risk in Banking
Credit Risk in Banking CREDIT RISK MODELS Sebastiano Vitali, 2017/2018 Merton model It consider the financial structure of a company, therefore it belongs to the structural approach models Notation: E
MORNING SESSION. Date: Wednesday, April 30, 2014 Time: 8:30 a.m. 11:45 a.m. INSTRUCTIONS TO CANDIDATES
SOCIETY OF ACTUARIES Quantitative Finance and Investment Core Exam QFICORE MORNING SESSION Date: Wednesday, April 30, 2014 Time: 8:30 a.m. 11:45 a.m. INSTRUCTIONS TO CANDIDATES General Instructions 1.
Notice Regarding the Allotment of Subscription Rights to Shares (Stock Compensation-Type Stock Options)
[This is an English translation prepared for reference purpose only. Should there be any inconsistency between the translation and the original Japanese text, the latter shall prevail.] June 15, 2018 Company
FLOTEK INDUSTRIES, INC.
UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended
Board Meeting Handout Financial Instruments: Liabilities and Equity May 5, 2004
Board Meeting Handout Financial Instruments: Liabilities and Equity May 5, 2004 At its March 3, 2004 education session, the Board discussed various bifurcation methods for financial instruments. The Board
Convertible Arbitrage: An Overview
4076 P-01 5/30/03 3:22 PM Page 1 CHAPTER 1 Convertible Arbitrage: An Overview There was a time when the word arbitrage brought to mind a picture of a mysterious realm in finance which few people seemed
Black-Scholes Option Pricing
Black-Scholes Option Pricing The pricing kernel furnishes an alternate derivation of the Black-Scholes formula for the price of a call option. Arbitrage is again the foundation for the theory. 1 Risk-Free
Derivatives Analysis & Valuation (Futures)
6.1 Derivatives Analysis & Valuation (Futures) LOS 1 : Introduction Study Session 6 Define Forward Contract, Future Contract. Forward Contract, In Forward Contract one party agrees to buy, and the counterparty
SBA COMMUNICATIONS CORP
SBA COMMUNICATIONS CORP FORM 10-Q (Quarterly Report) Filed 05/08/15 for the Period Ending 03/31/15 Address 8051 CONGRESS AVENUE BOCA RATON, FL 33487 Telephone 5619957670 CIK 0001034054 Symbol SBAC SIC
TRUE/FALSE 1 (2) TRUE FALSE 2 (2) TRUE FALSE. MULTIPLE CHOICE 1 (5) a b c d e 3 (2) TRUE FALSE 4 (2) TRUE FALSE. 2 (5) a b c d e 5 (2) TRUE FALSE
Tuesday, February 26th M339W/389W Financial Mathematics for Actuarial Applications Spring 2013, University of Texas at Austin In-Term Exam I Instructor: Milica Čudina Notes: This is a closed book and closed
Economic Risk and Decision Analysis for Oil and Gas Industry CE School of Engineering and Technology Asian Institute of Technology
Economic Risk and Decision Analysis for Oil and Gas Industry CE81.98 School of Engineering and Technology Asian Institute of Technology January Semester Presented by Dr. Thitisak Boonpramote Department
Structural Models I. Viral V. Acharya and Stephen M Schaefer NYU-Stern and London Business School (LBS), and LBS. Credit Risk Elective Spring 2009
Structural Models I Viral V. Acharya and Stephen M Schaefer NYU-Stern and London Business School (LBS), and LBS Credit Risk Elective Spring 009 The Black-Scholes-Merton Option Pricing Model options are
Notes for Lecture 5 (February 28)
Midterm 7:40 9:00 on March 14 Ground rules: Closed book. You should bring a calculator. You may bring one 8 1/2 x 11 sheet of paper with whatever you want written on the two sides. Suggested study questions
First Quarter 2010 Interim Unaudited Consolidated Financial Statements and Notes
First Quarter 2010 Interim Unaudited Consolidated Financial Statements and Notes May 7, 2010 Consolidated Statement of Operations Three Months Ended Unaudited March 31 (Canadian dollars in millions except
Notice of Issuance of Stock Options as Compensation (Stock Acquisition Rights) to the Company s Executive Officers
June 6, 2018 Koki Ando President and Representative Director, CEO Notice of Issuance of Stock Options as Compensation (Stock Acquisition Rights) to the Company s Executive Officers Nissin Foods Holdings
Giddy/ING Barings Investment Banking 1. Investment Banking at a Crossroads. Prof Ian Giddy. New York University. Customer-Driven Securities
Giddy/ING Barings Investment Banking 1 Investment Banking at a Crossroads Prof Ian Giddy New York University Investment Banking Sales Corporate Finance Customer-Driven Securities Capital Markets Copyright
81,821 98,564 89,490 LONG-TERM ASSETS: Long-term deposits Property, plant and equipment, net 5,611 7,354 6,483
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (except share and per share data) As of As of 2017 2016 2016 CURRENT ASSETS: Cash and cash equivalents $ 5,758 $ 5,533 $ 3,236 Restricted cash 47 47 47 Marketable
Financial Risk Forecasting Chapter 6 Analytical value-at-risk for options and bonds
Financial Risk Forecasting Chapter 6 Analytical value-at-risk for options and bonds Jon Danielsson 2017 London School of Economics To accompany Financial Risk Forecasting www.financialriskforecasting.com