CASE STUDY “LE PHILIPPE” Question1: Describe all the possible outcomes: As the following graph shows‚ from up to down‚ there are totally 6 possible outcomes depending on whether strike the put option or not and how to determine the new coupon rate at 2017 and 2020 respectively. Question2: Calculate the spot rate We can calculate the spot rate according to 1-5 year spot rate and the available 6-10 coupon rate by bootstrapping. We do not have the available 6-9 year spot rate‚ since the
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The issue here may lie with the 50% to 75% hedge as it is doubtful as to why GM does not hedge its receivables / payables by 100%. Perhaps the issue is related to high costs of using options and their receivables / payables run into huge amounts. Additionally‚ GM is not keen on committing to a forward because they have positive expectations about the future exchange rate and the forward would only serve to limit their possible gains.
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model .........................................7 How is the expected volatility of the stock price estimated?...............................................8 How is the expected term of the options estimated? ........................................................9 How are restrictions on shares or options considered? ....................................................10 If the plan is compensatory‚ over what period is compensation recorded?..............10 What is the impact of service‚
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Futures Position Transaction Costs of Currency Futures Currency Call Options Factors Affecting Call Option Premiums How Firms Use Currency Call Options Speculating with Currency Call Options Currency Put Options Factors Affecting Currency Put Option Premiums Hedging with Currency Put Options Speculating with Currency Put Options Contingency Graphs for Currency Options Conditional Currency Options European Currency Options Chapter Theme This chapter provides an overview of currency derivatives
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production of gold and copper. MML can mitigate and reduce these risks by entering into the future contracts and options. Future contract or option is suggested for MML who wants to hedge 50% of the production of gold and copper in March and April. In order to meet MML’s management request of low options premium payment‚ MML is advice to use put bear spread and strangle as their options combination strategy. 1.0 Introduction Metal Mining Ltd (MML)
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costs) What happens when the dollar appreciates/depreciates? What is the currency risk? Why can’t they just pass-through to their customers? For simplicity in calculations: Focus on the $/€. Ignore the time value of the investment in the option premium. Analysis Provide background to the case: what the company does‚ how it sets prices‚ why they don’t pass-through exchange rate volatility to customers. Examine Page 6 of the case closely: Define the base case scenario: Volume
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pay $110 per share at that time. What is the benefit of this derivative contract? Dell can buy Google stock today and take delivery in three months. If the price goes up‚ as it expects‚ Dell profits. If the price goes down‚ it loses. Example 2—Option Contract. Now suppose that Dell needs two weeks to decide whether to purchase Google stock. It therefore enters into a different type of contract‚ one that
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Australian School of Business School of Banking and Finance FINS 3635 OPTIONS‚ FUTURES AND RISK MANAGEMENT TECHNIQUES Course Outline Semester 1‚ 2012 Part A: Course-Specific Information Part B: Key Policies‚ Student Responsibilities andSupport Table of Contents PART A: COURSE-SPECIFIC INFORMATION 1 2 2.1 2.2 2.3 2.4 2.5 3 STAFF CONTACT DETAILS COURSE DETAILS Teaching Times and Locations Units of Credit Summary of Course Course Aims and Relationship to Other Courses Student Learning Outcomes
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Visit Free Slides and Ebooks : http://downloadslide.blogspot.com CHAPTER 16 Dilutive Securities and Earnings Per Share ASSIGNMENT CLASSIFICATION TABLE (BY TOPIC) Topics 1. Convertible debt and preference shares. Warrants and debt. Share options‚ restricted share. Earnings Per Share (EPS)—terminology. EPS—Determining potentially dilutive securities. EPS—Treasury share method. EPS—Weightedaverage computation. EPS—General objectives. EPS—Comprehensive calculations. EPS—Contingent shares. Convergence
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Valuation Stephen M Schaefer London Business School March‚ 2012 Outline • The no-arbitrage principle • Arrow-Debreu (A-D) securities and market completeness • Valuing options with one period to maturity via replication using underlying asset and borrowing / lending replication using A-D securities risk neutral probabilities • Valuing options with several periods to maturity Understanding Risk Neutral Valuation 2 No-arbitrage pricing Understanding Risk Neutral Valuation 3 Arbitrage (Definition) •
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