Mark Grinblatt Sheridan Titman Financial Markets and Corporate Strategy, 2/e McGraw-Hill/Irwin Copyright © 2002 by The McGraw-Hill Companies, Inc. All.

Slides:

Advertisements

Similar presentations

1 Introduction to Binomial Trees Chapter A Simple Binomial Model A stock price is currently $20 A stock price is currently $20 In three months it.

Advertisements

Chapter 20 Understanding Options Principles of Corporate Finance

INVESTMENTS | BODIE, KANE, MARCUS Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin CHAPTER 17 Options Markets:

Derivatives & Options Historical Topics (Internal to the Corp) 1 - Capital Budgeting (Investment) 2 - Capital Structure (Financing) Today We are leaving.

Spreads  A spread is a combination of a put and a call with different exercise prices.  Suppose that an investor buys simultaneously a 3-month put option.

CORPORATE FINANCIAL THEORY Lecture 10. Derivatives Insurance Risk Management Lloyds Ship Building Jet Fuel Cost Predictability Revenue Certainty.

McGraw-Hill/Irwin Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved Finance Chapter Thirteen Options on Stock Indices,

Mark Grinblatt Sheridan Titman Financial Markets and Corporate Strategy, 2/e McGraw-Hill/Irwin Copyright © 2002 by The McGraw-Hill Companies, Inc. All.

© 2003 The McGraw-Hill Companies, Inc. All rights reserved. Project Analysis and Evaluation Chapter Eleven.

24 Option Valuation.

© 2003 The McGraw-Hill Companies, Inc. All rights reserved. Credit and Inventory Management Chapter Twenty-One.

McGraw-Hill/Irwin © 2007 The McGraw-Hill Companies, Inc., All Rights Reserved. Options Markets CHAPTER 14.

© 2003 The McGraw-Hill Companies, Inc. All rights reserved. Working with Financial Statements Chapter Three.

4. Economic Effficiency Efficiency Equity Market system Social cost – External cost Public goods – Private cost.

© 2003 The McGraw-Hill Companies, Inc. All rights reserved. Financial Leverage and Capital Structure Policy Chapter Seventeen.

Chapter McGraw-Hill/Irwin Copyright © 2006 by The McGraw-Hill Companies, Inc. All rights reserved. 1 Introduction to Corporate Finance.

© 2003 The McGraw-Hill Companies, Inc. All rights reserved. Raising Capital Chapter Sixteen.

© 2003 The McGraw-Hill Companies, Inc. All rights reserved. Options and Corporate Finance Chapter Fourteen.

© 2003 The McGraw-Hill Companies, Inc. All rights reserved. Introduction to Valuation: The Time Value of Money Chapter Five.

McGraw-Hill/Irwin Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved Finance Chapter Ten Introduction to Binomial Trees.

© 2003 The McGraw-Hill Companies, Inc. All rights reserved. Net Present Value and Other Investment Criteria Chapter Nine.

© 2003 The McGraw-Hill Companies, Inc. All rights reserved. Short-Term Finance and Planning Chapter Nineteen.

7-1 McGraw-Hill/Irwin Copyright © 2008 The McGraw-Hill Companies, Inc., All Rights Reserved. CHAPTER 7 Capital Asset Pricing Model.

© 2003 The McGraw-Hill Companies, Inc. All rights reserved. Determining the Target Cash Balance Chapter Twenty A.

© 2003 The McGraw-Hill Companies, Inc. All rights reserved. Long-Term Financial Planning and Growth Chapter Four.

© 2003 The McGraw-Hill Companies, Inc. All rights reserved. Interest Rates and Bond Valuation Chapter Seven.

© 2003 The McGraw-Hill Companies, Inc. All rights reserved. Risk Management: An Introduction to Financial Engineering Chapter Twenty- Three.

Introduction to Risk, Return, and The Opportunity Cost of Capital

McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved Option Valuation Chapter 21.

1 Chapter 09 Characterizing Risk and Return McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.

© 2003 The McGraw-Hill Companies, Inc. All rights reserved. Option Valuation Chapter Twenty- Four.

© 2003 The McGraw-Hill Companies, Inc. All rights reserved. Return, Risk, and the Security Market Line Chapter Thirteen.

VIII: Options 26: Options Pricing. Chapter 26: Options Pricing © Oltheten & Waspi 2012 Options Pricing Models  Binomial Model  Black Scholes Options.

Chapter 23 Fundamentals of Corporate Finance Fifth Edition Slides by Matthew Will McGraw-Hill/Irwin Copyright © 2007 by The McGraw-Hill Companies, Inc.

 Spotting and Valuing Options Principles of Corporate Finance Brealey and Myers Sixth Edition Slides by Matthew Will Chapter 20 © The McGraw-Hill Companies,

McGraw-Hill/Irwin Copyright © 2004 by The McGraw-Hill Companies, Inc. All rights reserved Corporate Finance Ross  Westerfield  Jaffe Seventh Edition.

Option Pricing Models I. Binomial Model II. Black-Scholes Model (Non-dividend paying European Option) A. Black-Scholes Model is the Limit of the Binomial.

Financial Markets and Corporate Strategy

Chapter 24 Fundamentals of Corporate Finance Fourth Edition Options Slides by Matthew Will Irwin/McGraw Hill Copyright © 2003 by The McGraw-Hill Companies,

Essentials of Investments © 2001 The McGraw-Hill Companies, Inc. All rights reserved. Fourth Edition Irwin / McGraw-Hill Bodie Kane Marcus 1 Chapter 16.

McGraw-Hill/Irwin © 2007 The McGraw-Hill Companies, Inc., All Rights Reserved. Option Valuation CHAPTER 15.

CHAPTER 20 Investments Options Markets: Introduction Slides by Richard D. Johnson Copyright © 2008 by The McGraw-Hill Companies, Inc. All rights reserved.

Chapter 21 Principles PrinciplesofCorporateFinance Ninth Edition Understanding Options Slides by Matthew Will Copyright © 2008 by The McGraw-Hill Companies,

2007 Page 1 F. MICHAUX CORPORATE FINANCE Financial and Real Options.

Understanding Options

Understanding options

21 Valuing options McGraw-Hill/Irwin

1 The Black-Scholes Model Chapter Pricing an European Call The Black&Scholes model Assumptions: 1.European options. 2.The underlying stock does.

INVESTMENTS | BODIE, KANE, MARCUS Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin CHAPTER 18 Option Valuation.

McGraw-Hill/Irwin Copyright © 2004 by The McGraw-Hill Companies, Inc. All rights reserved. 9-0 Corporate Finance Ross  Westerfield  Jaffe Seventh Edition.

McGraw-Hill/Irwin © 2007 The McGraw-Hill Companies, Inc., All Rights Reserved. Options Markets CHAPTER 14.

McGraw-Hill/Irwin Copyright © 2006 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter 9 Derivatives: Futures, Options, and Swaps.

Mark Grinblatt Sheridan Titman Financial Markets and Corporate Strategy, 2/e McGraw-Hill/Irwin Copyright © 2002 by The McGraw-Hill Companies, Inc. All.

Chapter 11 Fundamentals of Corporate Finance Fifth Edition Slides by Matthew Will McGraw-Hill/Irwin Copyright © 2007 by The McGraw-Hill Companies, Inc.

Mark Grinblatt Sheridan Titman Financial Markets and Corporate Strategy, 2/e McGraw-Hill/Irwin Copyright © 2002 by The McGraw-Hill Companies, Inc. All.

Option Valuation.

Chapter 22 Principles PrinciplesofCorporateFinance Ninth Edition Valuing Options Slides by Matthew Will Copyright © 2008 by The McGraw-Hill Companies,

Chapter 21 Principles of Corporate Finance Tenth Edition Valuing Options Slides by Matthew Will McGraw-Hill/Irwin Copyright © 2011 by the McGraw-Hill Companies,

© 2003 The McGraw-Hill Companies, Inc. All rights reserved. Basics of Financial Options.

Essentials of Investments © 2001 The McGraw-Hill Companies, Inc. All rights reserved. Fourth Edition Irwin / McGraw-Hill Bodie Kane Marcus 1 Chapter 17.

Class Business Upcoming Groupwork Course Evaluations.

13-0 Return, Risk, and the Security Market Line Chapter 13 Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin.

McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. Example 1-Ad A.

Chapter 15 Option Valuation. McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved. Option Values Intrinsic value – Time value.

8-1 Risk Analysis in Investment Decisions CHAPTER 8 McGraw-Hill/Irwin Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.

Investments, 8 th edition Bodie, Kane and Marcus Slides by Susan Hine McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights.

McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved. Option Valuation 16.

McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved Options Markets: Introduction Chapter 20.

Chapter 21 Valuing Options Principles of Corporate Finance

Corporate Finance, Concise Understanding Options

Presentation transcript:

Mark Grinblatt Sheridan Titman Financial Markets and Corporate Strategy, 2/e McGraw-Hill/Irwin Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 8-1

Mark Grinblatt Sheridan Titman Financial Markets and Corporate Strategy, 2/e McGraw-Hill/Irwin Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 8-2 Part II Valuing Financial Assets

Mark Grinblatt Sheridan Titman Financial Markets and Corporate Strategy, 2/e McGraw-Hill/Irwin Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 8-3 Chapter 8 Options

Mark Grinblatt Sheridan Titman Financial Markets and Corporate Strategy, 2/e McGraw-Hill/Irwin Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 8-4 Exhibit 8.1: The Value of a Call Option and a Put Option at Expiration

Mark Grinblatt Sheridan Titman Financial Markets and Corporate Strategy, 2/e McGraw-Hill/Irwin Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 8-5 Exhibit 8.2: The Value of Short Positions in Call and Put Options at Expiration

Mark Grinblatt Sheridan Titman Financial Markets and Corporate Strategy, 2/e McGraw-Hill/Irwin Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 8-6 Exhibit 8.3: The Value at Expiration of a Long Position in a Call Option and a Short Position in a Put Option with the Same Features

Mark Grinblatt Sheridan Titman Financial Markets and Corporate Strategy, 2/e McGraw-Hill/Irwin Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 8-7 Exhibit 8.4a: Comparing Two Investments (Algebra)

Mark Grinblatt Sheridan Titman Financial Markets and Corporate Strategy, 2/e McGraw-Hill/Irwin Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 8-8 Exhibit 8.4b: Comparing Two Investments (Numbers) with K = $50

Mark Grinblatt Sheridan Titman Financial Markets and Corporate Strategy, 2/e McGraw-Hill/Irwin Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 8-9 Exhibit 8.5: Horizon Date Values of the Two Components of an Insured Portfolio

Mark Grinblatt Sheridan Titman Financial Markets and Corporate Strategy, 2/e McGraw-Hill/Irwin Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved Exhibit 8.6: Tree Diagram for the Value of the Stock (Above Node) and the Call Option (Below Node) Near the Expiration Date

Mark Grinblatt Sheridan Titman Financial Markets and Corporate Strategy, 2/e McGraw-Hill/Irwin Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved Exhibit 8.7: Binomial Tree Diagram for the Value of Centocor Stock (Above Node) and the Centocor Call Option (Below Node)

Mark Grinblatt Sheridan Titman Financial Markets and Corporate Strategy, 2/e McGraw-Hill/Irwin Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved Exhibit 8.8: Binomial Tree Diagram for the Price of Chiron Stock (Above Node) and an American Put Option (Below Node) with K = $27.50 and T=2

Mark Grinblatt Sheridan Titman Financial Markets and Corporate Strategy, 2/e McGraw-Hill/Irwin Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved Exhibit 8.9: Computation of the Volatility Estimate for the Black-Scholes Model Using Historical Return Data on Dell Computer Logged gross return standard deviation Annualized standard deviation, the volatility estimate Year-QuarterReturn %Gross Return %Logged Gross Return

Mark Grinblatt Sheridan Titman Financial Markets and Corporate Strategy, 2/e McGraw-Hill/Irwin Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved Exhibit 8.10: The Value of a Call Option as a Function of its Volatility

Mark Grinblatt Sheridan Titman Financial Markets and Corporate Strategy, 2/e McGraw-Hill/Irwin Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved Exhibit 8.11: Effect of Increasing Volatility

Mark Grinblatt Sheridan Titman Financial Markets and Corporate Strategy, 2/e McGraw-Hill/Irwin Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved Exhibit 8.12: Determinants of Current Option and Forward Prices: Effect of a Parameter Increase

Mark Grinblatt Sheridan Titman Financial Markets and Corporate Strategy, 2/e McGraw-Hill/Irwin Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved Exhibit 8.13: Implied Volatility versus Strike Price