选择是类型衍生物

1、Derivatives & OptionsHistorical Topics (Internal to the Corp)1 - Capital Budgeting (Investment)2 - Capital Structure (Financing)TodayWe are leaving Internal Corporate FinanceWe are going to Wall St & “Capital Markets”Options - financial and corporateOptions are a type of derivative1OptionsTerminolog

2、yDerivatives - Any financial instrument that is derived from another. (e.g. options, warrants, futures, swaps, etc.)Option - Gives the holder the right to buy or sell a security at a specified price during a specified period of time.Call Option - The right to buy a security at a specified price with

3、in a specified time. Put Option - The right to sell a security at a specified price within a specified time.Option Premium - The price paid for the option, above the price of the underlying security.Intrinsic Value - Diff between the strike price and the stock priceTime Premium - Value of option abo

4、ve the intrinsic value2OptionsTerminologyExercise Price - (Striking Price) The price at which you buy or sell the security.Expiration Date - The last date on which the option can be exercised. American Option - Can be exercised at any time prior to and including the expiration date.European Option -

5、 Can be exercised only on the expiration date. All options “usually” act like European options because you make more money if you sell the option before expiration (vs. exercising it). 3 vs. 70-68=23Option Obligations4Option ValueThe value of an option at expiration is a function of the stock price

6、and the exercise price.5Option ValueThe value of an option at expiration is a function of the stock price and the exercise price.Example - Option values given a exercise price of $856OptionsCBOE Success1 - Creation of a central options market place.2 - Creation of Clearing Corp - the guarantor of al

7、l trades.3 - Standardized expiration dates - 3rd Friday4 - Created a secondary market7OptionsComponents of the Option Price1 - Underlying stock price2 - Striking or Exercise price3 - Volatility of the stock returns (standard deviation of annual returns)4 - Time to option expiration5 - Time value of

8、money (discount rate)8Black-Scholes Option Pricing Model OC = PsN(d1) - SN(d2)e-rt9Black-Scholes Option Pricing Model OC = PsN(d1) - SN(d2)e-rtOC- Call Option PricePs - Stock PriceN(d1) - Cumulative normal density function of (d1)S - Strike or Exercise price N(d2) - Cumulative normal density functio

9、n of (d2)r - discount rate (90 day comm paper rate or risk free rate)t - time to maturity of option (as % of year)v - volatility - annualized standard deviation of daily returns10 (d1)=ln + ( r + ) tPsSv22v t32 34 36 38 40Cumulative Normal Density FunctionN(d1)=11Cumulative Normal Density Function12

10、 (d1)=ln + ( r + ) tPsSv22v tCumulative Normal Density Function (d2) = d1 - v t13Call OptionExampleWhat is the price of a call option given the following?. P = 36r = 10%v = .40S = 40t = 90 days / 36514Call OptionExampleWhat is the price of a call option given the following?. P = 36r = 10%v = .40S =

11、40t = 90 days / 365 (d1) =ln + ( r + ) tPsSv22v t (d1) = - .3070N(d1) = 1 - .6206 = .379415Call Option.3070= .3= .00= .00716Call OptionExampleWhat is the price of a call option given the following?. P = 36r = 10%v = .40S = 40t = 90 days / 365 (d2) = - .5056N(d2) = 1 - .6935 = .3065 (d2) = d1 - v t17

12、Call OptionExampleWhat is the price of a call option given the following?. P = 36r = 10%v = .40S = 40t = 90 days / 365OC = PsN(d1) - SN(d2)e-rtOC = 36.3794 - 40.3065e - (.10)(.2466)OC = $ 1.7018Put - Call ParityPut Price = Oc + S - P - Carrying Cost + Div. Carrying cost = r x S x t19ExampleIBM is se

13、lling at $41 a share. A six month May 40 Call is selling for $4.00. If a May $ .50 dividend is expected and r=10%, what is the put price?Put - Call Parity20ExampleIBM is selling at $41 a share. A six month May 40 Call is selling for $4.00. If a May $ .50 dividend is expected and r=10%, what is the p

14、ut price?Put - Call ParityOp = Oc + S - P - Carrying Cost + Div.Op = 4 + 40 - 41 - (.10 x 40 x .50) + .50Op = 3 - 2 + .5Op = $1.50 21Warrants & ConvertiblesReview Ch 22 (not going over in class)Warrant - a call option with a longer time to expiration. Value a warrant as an option, plus factor in div

15、idends and dilution.Convertible - Bond with the option to exchange it for stock. Value as a regular bond + a call option.Wont require detailed valuation - general concept on valuation + new option calc and old bond calc. 22Option StrategiesOption Strategies are viewed via charts.How do you chart an

16、option?Stock PriceProfitLoss23Option StrategiesLong Stock Bought stock Ps = 10024Option StrategiesLong Call Bought Call Oc = 3 S=27 Ps=3025Option StrategiesShort Call Sold Call Oc = 3 S=27 Ps=3026Option StrategiesLong Put = Buy Put Op = 2 S=15 Ps=1327Option StrategiesShort Put = Sell Put Op = 2 S=15

17、 Ps=1328Option StrategiesSynthetic Stock = Short Put & Long Call Oc = 1.50 Op=1.50 S=27 Ps=27P/LPs273024-1.50+1.5029Option StrategiesP/LPs273024-1.50+1.50Synthetic Stock = Short Put & Long Call Oc = 1.50 Op=1.50 S=27 Ps=2730Option StrategiesSynthetic Stock = Short Put & Long Call Oc = 1.50 Op=1.50 S

18、=27 Ps=2731Option StrategiesWhy?1 - Reduce risk - butterfly spread2 - Gamble - reverse straddle3 - Arbitrage - as in syntheticsArbitrage - If the price of a synthetic stock is different than the price of the actual stock, an opportunity for profit exists.32Corporate OptionsCh 213 types of “Real Opti

19、ons”1 - The opportunity to make follow-up investments.2 - The opportunity to abandon a project3 - The opportunity to “wait” and invest later.Value “Real Option” = NPV with option - NPV w/o option33Example - AbandonMrs. Mulla gives you a non-retractable offer to buy your company for $150 mil at anyti

20、me within the next year. Given the following decision tree of possible outcomes, what is the value of the offer (i.e. the put option) and what is the most Mrs. Mulla could charge for the option?Use a discount rate of 10%Corporate Options34Example - AbandonMrs. Mulla gives you a non-retractable offer

21、 to buy your company for $150 mil at anytime within the next year. Given the following decision tree of possible outcomes, what is the value of the offer (i.e. the put option) and what is the most Mrs. Mulla could charge for the option?Corporate OptionsYear 0Year 1Year 2 120 (.6) 100 (.6) 90 (.4)NPV = 145 70 (.6) 50 (.4)40 (.4)35Example - AbandonMrs. Mulla gives you a non-retractable offer to buy your company for $150 mil at anytime within the next year. Given the following decision tree of possible outcomes, what is the value of the o