1. Click to edit Master title style Corporate Financial Management II (#4)

2. Corporate Financial Management II2 Derivatives and Risk Management Financial Derivatives Forward Contracts (Futures, Swaps, Repos) Options Committed (FW) or Contingent (Options) Contracts on Underlying Assets (FX, Commodity, Equity, Interest Rate, Indices...) May be used for speculation (opening positions) or hedging (closing positions) Chapter 23

3. Corporate Financial Management II3 Real Options Flexibility to react to newly acquired information may increase NPV. Growth/development options Contraction/abandonment options Investment timing options Exchange options Chapter 25

4. Corporate Financial Management II4 Utilization  Real options may offer considerable value wherever there is subtantial uncertainty over a long time-span, and where project flexibility can be influenced by various technical or organizational solutions. Investments in natural resources, land Patents, licenses, intangibles, R&D Energy, telecoms, mining, pharmaceutical...

5. Corporate Financial Management II5 Valuation Analytical Closed-form, analogy to B-S (unusual) Numerical Decision-Tree Analysis Statistical Simulation Non-parametrical models (Historical Simulation) Parametrical models (Monte Carlo Simulation)