"Option" Essays and Research Papers

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Real Option Memo To: Dave Jacobs From: James Jones Date: November 26, 2012 Re: College Education Intro and type of flexibility with this option The option I’m going to discuss in this memo is whether I should continue on with my college career year after year, or just to abandon receiving a higher education and make my part time job a full time job. From the 7S framework, my real option would be the Disinvest/Shrink then the scope down option (abandon). Sources of uncertainty There...

Free Estimation, Part-time, Full-time 567  Words | 3  Pages

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Futures and Options

contract, the derivatives are settled at a future date. Role of Financial Derivatives. We can classify financial derivatives based on different parameters. The most common are: 1. Derivatives according to the type of contract involved: a. Options. b. Forwards. c. Contracts for difference. d. SWAPS. 2. Depending on where derivatives are traded and traded: Derivatives traded on organized markets: Here are standardized contracts on underlying assets that were previously authorized. Furthermore...

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Option and Major Studios

value b. Exercise price c. Volatility of asset returns d. Time to maturity e. Risk-free rate HINT: Note that the time to maturity of the options is when uncertainty is resolved not necessarily when the sequel is made. The asset value is what you will get if you exercised the option to make the sequel. Again use average values for all the sequels. Similarly use the average value of the cost to make the sequels for the exercise price. Estimating standard deviation...

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Foreign Currency Futures and Options

Compare and contrast foreign currency futures and options. Identify situations where you may choose one or the other. When Barings Bank, the oldest merchant bank in London, collapsed in 1995 after one of the bank’s employees lost £827 million due to speculative investing, primarily in futures contracts, it illustrated the extreme danger and volatility of derivatives. Options and futures can be used to eliminate, reduce, hedge and manage risk, but can also be highly speculative. Foreign currency...

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Currency Futures and Option Markets

CHAPTER 7: CURRENCY FUTURES AND OPTION MARKETS 7.1 FUTURE CONTRACTS 7.1.1 Definition of future contract–> contracts written requiring a standard quantity of an available currency at a fixed exchange rate and at a set delivery date. A future contract is defined as a contractual agreement to buy or sell an asset at a pre-determined price in the future. The contracts detail the quality and quantity of the underlying asset. Background of currency futures in 1972: Chicago Mercantile Exchange...

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Stock Options

Many years ago stock options were rarely used as incidental benefits for top executives. Nowadays, compensating employee whit stock options has become an increasingly common practice. Before the year 1996, only the intrinsic value method was used to record these transactions. This method distorted the issuer’s reported financial condition and results of operations, which could lead to inappropriate decisions taken by investors. Followed by the increased use of employee stock options and the surrounding...

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Option and Value

following are always positively related to the price of a European call option on a stock? c. The volatility 5. When we talked about Vega hedging, if a portfolio has 1000 shares of SPY and 10 contracts of at-the-money December 2013 put option on SPY (and nothing else in the portfolio), is the portfolio vega neutral? c. No, the portfolio can never be vega neutral. 6. Which of the following is not true? a. When a CBOE option on IBM is exercised, IBM issues more stock 7. Which of the following...

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Vix Options

Trading volatility is nothing new for option traders. Most option traders rely heavily on volatility information to choose their trades. For this reason, the Chicago Board Options Exchange (CBOE) Volatility Index, more commonly known by its ticker symbol VIX, has been a popular trading tool for option and equity traders since its introduction in 1993. Until recently, traders used regular equity or index options to trade volatility, but many quickly realized that this was not the best method. On Feb...

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futures options

Walking Through Some Examples of Futures and Options Contracts – Speculation and Hedging As Dr. Cogley said in class the other day, sometimes futures contracts and options are hard to wrap your head around until you see them a few times. So I’ve written up some examples similar to those Dr. Cogley did in lecture, with a little more explanation about how we get the results that we do. But before we jump into that, we need to revisit our terms. 1. Forward contract: A buyer and a seller agree to a specific...

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Stock Options

STOCK OPTIONS - AN EFFECTIVE COMPENSATION METHOD Stock Options have become the greatest form of remuneration for big names in organizations across the United States (Hall, 2000). The senior executives, who are given this option, can buy shares of the company at what Hall (2000) describes as the “exercise price”. They could be given “at the money”, “out of the money” or “in the money” price (Hall, 2000). Stock Options are helpful in motivating the holders to perform for the benefit of the company...

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