UVA-F-1339 Version 2.6 CORNING‚ INC.: ZERO COUPON CONVERTIBLE DEBENTURES DUE NOVEMBER 8‚ 2015 (A) On November 8‚ 2000‚ Corning announced that it would issue $2.7 billion in zero-coupon convertible debentures priced at $741.923 per $1‚000 principal amount. The initial public offering (IPO) price yielded 2% per annum to maturity‚ compounded semiannually. A summary of terms is given in Exhibit 1. Concurrent with the offering‚ Corning also conducted a separate public offering of 30 million shares of
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project alone. The option for Penelope to make the follow-on investments can be treated as a call option. Therefore‚ we evaluated the expected value of the second-generation project by using Black-Scholes. If Penelope wanted to justify investing in the first-generation project by investing in the second-generation project‚ they would need the total APV equal or greater than zero‚ which means the sum of NPV of the first-generation project (- $3‚370‚071) and value of the call option to make the follow-on
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Body…………………………………………………………………… .2-9 3.1 Transaction exposure………………………………………………………2-3 3.2 Three Hedges………………………………………………………………3-9 3.3.1 Forwards……………………………………………………………4-6 3.3.2 Futures……………………………………………………………..6-8 3.3.3 Currency option……………………………………………………8-9 3. Conclusion…………………………………………………………………………………...………….11-13 Introduction In the period of crisis the volatility of foreign exchange is the key element to be consider in the risk management strategy in multinational corporations
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efficient frontier. Interpret your results in comparison to the two asset case in a). 2) Assume that on 1/8/2012‚ when the WBK share price was S= AUD 22.5 a trader has sold 200‚000 European WBK call options with strike price K=25 and expiration date 1/11/2012. Suppose that the amount received for the options was AUD 200‚000. Further assume that the yearly
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alternative was to sell yen for dollars at a predetermined price in the future using a forward contract. The second alternative was to purchase a yen put option allowing them to exercise their option only if it was more profitable in the future at the future spot rate. Two more alternatives that we think are appropriate are a synthetic forward using options and a synthetic forward using interest rate parity. Furthermore‚ Tiffany needs to understand the hedging alternatives and determine what‚ if any‚
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FINANCIAL RISK MANAGEMENT FREQUENTLY ASKED QUESTIONS Module 1 – Introduction to financial risk management 1. What are the major categories of risk? Please provide examples. (Topic heading: Main categories of risk controls SG 1.32) Seven categories of risk are outlined. These are summarised in the table below: Type of risk Definition Example Liquidity The risk of not being able to pay back what you owe due to the inability to convert assets into cash quickly‚ without materially
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Hedging Corporate Revenues with Weather Derivatives: A Case Study Master of Science in Banking and Finance - MBF Master’s Thesis Antoni Ferrer Garcia Franz Sturzenegger Universit´ de Lausanne e Ecole des Hautes Etudes Commerciales HEC - 2001 Abstract This paper searches for the implications in the use of a new generation of financial derivatives known as Weather Derivatives as a form of hedging future corporate revenues. According to the US Department of Commerce about 22 per cent of
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cedis/$ 1.95 Expected spot exchange rate in 6 months‚ cedis/$ 2.00 Options on Ghanaian cedis: Call Option Put Option Strike price‚ cedis/$ 2.00 2.00 Option premium (percent) 2.00% 3.00% United States Ghana Six-month interest rate for borrowing (per annum) 4.00% 8.00% Six-month interest rate for investing (per annum) 2.00% 6.00% (a) If the company wants to offset their exposure‚ what options they have? And which one is the best? Why? Q2. From base price levels
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instruments are the following: * Recommendation from Yahoo‚ TD Ameritrade and other websites. * Price pattern * High or moderate P/E ratio * Seasons (spring‚ summer‚ fall and winter) for the commodities * Class lessons on option for option strategies I used the seasons to buy 2000 of iPath S&P GSCI Crude Oil Total Return Index ETN and 10 April futures on gaz. I used the thought that as we were still in winter when the project began that people would use more
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On Constructing a Market Consistent Economic Scenario Generator Ebba K. Baldvinsdóttir & Lina Palmborg March 4‚ 2011 Abstract Recently the insurance industry has started to realise the importance of properly managing options and guarantees embedded in insurance contracts. Interest rates have been low in the last few years‚ which means that minimum interest rate guarantees have moved from being far out-of-the money to expiring inthe-money. As a result‚ many insurance companies have experienced
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