Real Options Valuation
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FINANCIAL DERIVATIVES SAMPLE QUESTIONS Q1. a Strangle Is an Investment Strategy That Combines A. a Call and a Put for the Same
FINANCIAL DERIVATIVES SAMPLE QUESTIONS Q1. A strangle is an investment strategy that combines a. A call and a put for the same expiry date but at different strike prices b. Two puts and one call with the same expiry date c. Two calls and one put with the same expiry dates d. A call and a put at the same strike price and expiry date Answer: a. Q2. A trader buys 2 June expiry call options each at a strike price of Rs. 200 and Rs. 220 and sells two call options with a strike price of Rs. 210, this strategy is a a. Bull Spread b. Bear call spread c. Butterfly spread d. Calendar spread Answer c. Q3. The option price will ceteris paribus be negatively related to the volatility of the cash price of the underlying. a. The statement is true b. The statement is false c. The statement is partially true d. The statement is partially false Answer: b. Q 4. A put option with a strike price of Rs. 1176 is selling at a premium of Rs. 36. What will be the price at which it will break even for the buyer of the option a. Rs. 1870 b. Rs. 1194 c. Rs. 1140 d. Rs. 1940 Answer b. Q5 A put option should always be exercised _______ if it is deep in the money a. early b. never c. at the beginning of the trading period d. at the end of the trading period Answer a. Q6. Bermudan options can only be exercised at maturity a. -
Up to EUR 3,500,000.00 7% Fixed Rate Bonds Due 6 April 2026 ISIN
Up to EUR 3,500,000.00 7% Fixed Rate Bonds due 6 April 2026 ISIN IT0005440976 Terms and Conditions Executed by EPizza S.p.A. 4126-6190-7500.7 This Terms and Conditions are dated 6 April 2021. EPizza S.p.A., a company limited by shares incorporated in Italy as a società per azioni, whose registered office is at Piazza Castello n. 19, 20123 Milan, Italy, enrolled with the companies’ register of Milan-Monza-Brianza- Lodi under No. and fiscal code No. 08950850969, VAT No. 08950850969 (the “Issuer”). *** The issue of up to EUR 3,500,000.00 (three million and five hundred thousand /00) 7% (seven per cent.) fixed rate bonds due 6 April 2026 (the “Bonds”) was authorised by the Board of Directors of the Issuer, by exercising the powers conferred to it by the Articles (as defined below), through a resolution passed on 26 March 2021. The Bonds shall be issued and held subject to and with the benefit of the provisions of this Terms and Conditions. All such provisions shall be binding on the Issuer, the Bondholders (and their successors in title) and all Persons claiming through or under them and shall endure for the benefit of the Bondholders (and their successors in title). The Bondholders (and their successors in title) are deemed to have notice of all the provisions of this Terms and Conditions and the Articles. Copies of each of the Articles and this Terms and Conditions are available for inspection during normal business hours at the registered office for the time being of the Issuer being, as at the date of this Terms and Conditions, at Piazza Castello n. -
Lecture 5 an Introduction to European Put Options. Moneyness
Lecture: 5 Course: M339D/M389D - Intro to Financial Math Page: 1 of 5 University of Texas at Austin Lecture 5 An introduction to European put options. Moneyness. 5.1. Put options. A put option gives the owner the right { but not the obligation { to sell the underlying asset at a predetermined price during a predetermined time period. The seller of a put option is obligated to buy if asked. The mechanics of the European put option are the following: at time−0: (1) the contract is agreed upon between the buyer and the writer of the option, (2) the logistics of the contract are worked out (these include the underlying asset, the expiration date T and the strike price K), (3) the buyer of the option pays a premium to the writer; at time−T : the buyer of the option can choose whether he/she will sell the underlying asset for the strike price K. 5.1.1. The European put option payoff. We already went through a similar procedure with European call options, so we will just briefly repeat the mental exercise and figure out the European-put-buyer's profit. If the strike price K exceeds the final asset price S(T ), i.e., if S(T ) < K, this means that the put-option holder is able to sell the asset for a higher price than he/she would be able to in the market. In fact, in our perfectly liquid markets, he/she would be able to purchase the asset for S(T ) and immediately sell it to the put writer for the strike price K. -
Launch Announcement and Supplemental Listing Document for Callable Bull/Bear Contracts Over Single Equities
6 August 2021 Hong Kong Exchanges and Clearing Limited (“HKEX”), The Stock Exchange of Hong Kong Limited (the “Stock Exchange”) and Hong Kong Securities Clearing Company Limited take no responsibility for the contents of this document, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this document. This document, for which we and our Guarantor accept full responsibility, includes particulars given in compliance with the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited (the “Rules”) for the purpose of giving information with regard to us and our Guarantor. We and our Guarantor, having made all reasonable enquiries, confirm that to the best of our knowledge and belief the information contained in this document is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement herein or this document misleading. This document is for information purposes only and does not constitute an invitation or offer to acquire, purchase or subscribe for the CBBCs. The CBBCs are complex products. Investors should exercise caution in relation to them. Investors are warned that the price of the CBBCs may fall in value as rapidly as it may rise and holders may sustain a total loss of their investment. Prospective purchasers should therefore ensure that they understand the nature of the CBBCs and carefully study the risk factors set out in the Base Listing Document (as defined below) and this document and, where necessary, seek professional advice, before they invest in the CBBCs. -
Futures and Options Workbook
EEXAMININGXAMINING FUTURES AND OPTIONS TABLE OF 130 Grain Exchange Building 400 South 4th Street Minneapolis, MN 55415 www.mgex.com [email protected] 800.827.4746 612.321.7101 Fax: 612.339.1155 Acknowledgements We express our appreciation to those who generously gave their time and effort in reviewing this publication. MGEX members and member firm personnel DePaul University Professor Jin Choi Southern Illinois University Associate Professor Dwight R. Sanders National Futures Association (Glossary of Terms) INTRODUCTION: THE POWER OF CHOICE 2 SECTION I: HISTORY History of MGEX 3 SECTION II: THE FUTURES MARKET Futures Contracts 4 The Participants 4 Exchange Services 5 TEST Sections I & II 6 Answers Sections I & II 7 SECTION III: HEDGING AND THE BASIS The Basis 8 Short Hedge Example 9 Long Hedge Example 9 TEST Section III 10 Answers Section III 12 SECTION IV: THE POWER OF OPTIONS Definitions 13 Options and Futures Comparison Diagram 14 Option Prices 15 Intrinsic Value 15 Time Value 15 Time Value Cap Diagram 15 Options Classifications 16 Options Exercise 16 F CONTENTS Deltas 16 Examples 16 TEST Section IV 18 Answers Section IV 20 SECTION V: OPTIONS STRATEGIES Option Use and Price 21 Hedging with Options 22 TEST Section V 23 Answers Section V 24 CONCLUSION 25 GLOSSARY 26 THE POWER OF CHOICE How do commercial buyers and sellers of volatile commodities protect themselves from the ever-changing and unpredictable nature of today’s business climate? They use a practice called hedging. This time-tested practice has become a stan- dard in many industries. Hedging can be defined as taking offsetting positions in related markets. -
Data Integrity in Financial Modeling
Data Integrity in Financial Modeling By Eric Kolchinsky, NAIC Director, Structured Securities fundamental assumptions of statistics and how they can Group limit the usefulness of financial models. Next, we review the differences between the mortgage loan information used to Introduction analyze pre-crisis RMBS and the loans’ true characteristics. With the benefit of hindsight, we can see 2009 was the be- Lastly, we discuss how the SSG and the Valuation of Securi- ginning of a slow recovery from the nadir of the recent global ties (E) Task Force are working to ensure the appropriate financial crisis. However, as the mortgage-induced crisis con- use of financial models for structured securities purchased tinued, the NAIC took a brave and a radical step—no longer by insurance companies. were ratings to be used to set the capital for residential mort- gage-backed securities (RMBS). RMBS, along with collateral- “Garbage in, Garbage out” ized debt obligations (CDOs), were at the epicenter of the crisis and had leveled financial giants such as Bear Stearns, “Pray, Mr. Babbage, if you put into the machine wrong Lehman Brothers, Fannie Mae, Freddie Mac and AIG. figures, will the right answers come out?” —Question posed to Charles Babbage, the creator of The NAIC decided to directly engage analytical vendors who the first mechanical computer. would work under the direct supervision of the Securities Valuation Office (SVO). PIMCO was chosen as the vendor for It is a common failure of human nature to find purpose in RMBS and, the following year, BlackRock Solutions was cho- complexity, and financial models are not immune. -
Preqin Special Report: Subscription Credit Facilities
PREQIN June 2019 SPECIAL REPORT: SUBSCRIPTION CREDIT FACILITIES PREQIN SPECIAL REPORT; SUBSCRIPTION CREDIT FACILITIES Contents 3 CEO’s Foreword 4 Subscription Credit Facility Usage in Private Capital 7 Subscription Lines of Credit and LP-GP Alignment: ILPA’s Recommendations - ILPA 8 Are Subscription Facilities Oversubscribed? - Fitch Ratings 10 Subscription Finance Market - McGuireWoods LLP Download the Data Pack All of the data presented in this report is available to download in Excel format: www.preqin.com/SCF19 As with all our reports, we welcome any feedback you may have. To get in touch, please email us at: [email protected] 2 CEO's Foreword Subscription credit facilities: angels or demons? A legitimate and valuable tool for managing liquidity and streamlining transactions in a competitive market, or a cynical ploy for massaging IRRs? The debate continues in private equity and wider private capital circles. As is often the case, historical perspective is helpful. Private capital operates in a dynamic and competitive environment, as GPs and LPs strive to achieve superior net returns, through good times and bad. Completing deals and generating the positive returns that LPs Mark O’Hare expect has never been more challenging than it is CEO, Preqin today, given the availability of capital and the appetite for attractive assets in the market. Innovation and answers: transparent data, combined with thoughtful dynamism have long been an integral aspect of the communication and debate. private capital industry’s arsenal of tools, comprised of alignment of interest; close attention to operational Preqin’s raison d’être is to support and serve the excellence and value add; over-allocation in order to alternative assets industry with the best available data. -
Real Options Valuation As a Way to More Accurately Estimate the Required Inputs to DCF
Northwestern University Kellogg Graduate School of Management Finance 924-A Professor Petersen Real Options Spring 2001 Valuation is at the foundation of almost all finance courses and the intellectual foundation of most valuation methods which we will examine is discounted cashflow. In Finance I you used DCF to value securities and in Finance II you used DCF to value projects. The valuation approach in Futures and Options appeared to be different, but was conceptually very similar. This course is meant to expand your knowledge of valuation – both the intuition of how it should be done as well as the practice of how it is done. Understanding when the two are the same and when they are not can be very valuable. Prerequisites: The prerequisite for this course is Finance II (441)/Turbo (440) and Futures and Options (465). Given the structure of the course, no auditors will be allowed. Course Readings: Course Packet for Finance 924 - Petersen Warning: This is a relatively new course. Thus you should expect that the content and organization of the course will be fluid and may change in real time. I reserve the right to add and alter the course materials during the term. I understand that this makes organization challenging. You need to keep on top of where we are and what requirements are coming. If you are ever unsure, ASK. I will keep you informed of the schedule via the course web page. You should check it each week to see what we will cover the next week and what assignments are due. -
Ice Crude Oil
ICE CRUDE OIL Intercontinental Exchange® (ICE®) became a center for global petroleum risk management and trading with its acquisition of the International Petroleum Exchange® (IPE®) in June 2001, which is today known as ICE Futures Europe®. IPE was established in 1980 in response to the immense volatility that resulted from the oil price shocks of the 1970s. As IPE’s short-term physical markets evolved and the need to hedge emerged, the exchange offered its first contract, Gas Oil futures. In June 1988, the exchange successfully launched the Brent Crude futures contract. Today, ICE’s FSA-regulated energy futures exchange conducts nearly half the world’s trade in crude oil futures. Along with the benchmark Brent crude oil, West Texas Intermediate (WTI) crude oil and gasoil futures contracts, ICE Futures Europe also offers a full range of futures and options contracts on emissions, U.K. natural gas, U.K power and coal. THE BRENT CRUDE MARKET Brent has served as a leading global benchmark for Atlantic Oseberg-Ekofisk family of North Sea crude oils, each of which Basin crude oils in general, and low-sulfur (“sweet”) crude has a separate delivery point. Many of the crude oils traded oils in particular, since the commercialization of the U.K. and as a basis to Brent actually are traded as a basis to Dated Norwegian sectors of the North Sea in the 1970s. These crude Brent, a cargo loading within the next 10-21 days (23 days on oils include most grades produced from Nigeria and Angola, a Friday). In a circular turn, the active cash swap market for as well as U.S. -
Sr. Financial Analyst/Underwriter Portfolio Management & Project
Job Opening November 10, 2014 JOB TITLE: Sr. Financial Analyst/Underwriter LOCATION: NYC DEPARTMENT: Portfolio Management & Project Finance BASIC FUNCTION: Conduct financial and credit analysis of commercial/real estate developments and operating companies to determine amount of State support required and to structure loans, grants, disposition of State assets and other subsidies accordingly. WORK PERFORMED: Review and analyze financial statements to determine the creditworthiness of all commercial loan originations. Obtain financial projections and create cash flow models for operating companies and real estate developments. Perform site visits and conduct interviews with counter parties. Perform risk assessment of credit and collateral ensuring loan stability and sound credit quality. Draft loan reports and present to the board for approval. Research, develop and implement programs that promote economic development. Create financial products which help fill funding gaps and the market. Develop revenue generating ideas such as loans, credit enhancements, etc. Provide high-level financial analysis assistance to various other departments, including real estate, venture capital and loans & grants, in addition to other governmental agencies. Critically analyze large-scale development projects throughout New York State and help structure potential loans, grants and other state subsides. Perform sensitivity analyses and initiate financial feasibility studies on complex business development proposals. Conduct site visits to borrowers and grantees for continued engagement and research. Cultivate relations with small/mid-size, regional banks, CDFIs, local development agencies and industry organizations and form partnerships to help businesses in New York State to grow and prosper. Attend various conferences and seminars to establish new contacts and discover new opportunities. EDUCATION & REQUIREMENTS: Education Level required: MBA in Finance or Real Estate desirable. -
Uva-F-1274 Methods of Valuation for Mergers And
Graduate School of Business Administration UVA-F-1274 University of Virginia METHODS OF VALUATION FOR MERGERS AND ACQUISITIONS This note addresses the methods used to value companies in a merger and acquisitions (M&A) setting. It provides a detailed description of the discounted cash flow (DCF) approach and reviews other methods of valuation, such as book value, liquidation value, replacement cost, market value, trading multiples of peer firms, and comparable transaction multiples. Discounted Cash Flow Method Overview The discounted cash flow approach in an M&A setting attempts to determine the value of the company (or ‘enterprise’) by computing the present value of cash flows over the life of the company.1 Since a corporation is assumed to have infinite life, the analysis is broken into two parts: a forecast period and a terminal value. In the forecast period, explicit forecasts of free cash flow must be developed that incorporate the economic benefits and costs of the transaction. Ideally, the forecast period should equate with the interval in which the firm enjoys a competitive advantage (i.e., the circumstances where expected returns exceed required returns.) For most circumstances a forecast period of five or ten years is used. The value of the company derived from free cash flows arising after the forecast period is captured by a terminal value. Terminal value is estimated in the last year of the forecast period and capitalizes the present value of all future cash flows beyond the forecast period. The terminal region cash flows are projected under a steady state assumption that the firm enjoys no opportunities for abnormal growth or that expected returns equal required returns in this interval. -
RT Options Scanner Guide
RT Options Scanner Introduction Our RT Options Scanner allows you to search in real-time through all publicly traded US equities and indexes options (more than 170,000 options contracts total) for trading opportunities involving strategies like: - Naked or Covered Write Protective Purchase, etc. - Any complex multi-leg option strategy – to find the “missing leg” - Calendar Spreads Search is performed against our Options Database that is updated in real-time and driven by HyperFeed’s Ticker-Plant and our Implied Volatility Calculation Engine. We offer both 20-minute delayed and real-time modes. Unlike other search engines using real-time quotes data only our system takes advantage of individual contracts Implied Volatilities calculated in real-time using our high-performance Volatility Engine. The Scanner is universal, that is, it is not confined to any special type of option strategy. Rather, it allows determining the option you need in the following terms: – Cost – Moneyness – Expiry – Liquidity – Risk The Scanner offers Basic and Advanced Search Interfaces. Basic interface can be used to find options contracts satisfying, for example, such requirements: “I need expensive Calls for Covered Call Write Strategy. They should expire soon and be slightly out of the money. Do not care much as far as liquidity, but do not like to bear high risk.” This can be done in five seconds - set the search filters to: Cost -> Dear Moneyness -> OTM Expiry -> Short term Liquidity -> Any Risk -> Moderate and press the “Search” button. It is that easy. In fact, if your request is exactly as above, you can just press the “Search” button - these values are the default filtering criteria.