tailieunhanh - Essentials of Investments: Chapter 16 - Option Valuation

Essentials of Investments: Chapter 16 - Option Valuation to discuss factors that affect option prices and to present quantitative option pricing models. It includes Factors influencing option values, BlacScholes option valuation, Using the BlacScholes formula, Binomial Option Pricing. | Bodie Kane Marcus Perrakis Ryan Chapter 16 INVESTMENTS, Fourth Canadian Edition Option Valuation Slide 18-1 Copyright © McGraw-Hill Ryerson Limited, 2003 Bodie Kane Marcus Perrakis Ryan INVESTMENTS, Fourth Canadian Edition Chapter Summary Objective: To discuss factors that affect option prices and to present quantitative option pricing models. Factors influencing option values Black-Scholes option valuation Using the Black-Scholes formula Binomial Option Pricing Slide 18-2 Copyright © McGraw-Hill Ryerson Limited, 2003 Bodie Kane Marcus Perrakis Ryan INVESTMENTS, Fourth Canadian Edition Option Values Intrinsic value - profit that could be made if the option was immediately exercised Call: stock price - exercise price Put: exercise price - stock price Time value - the difference between the option price and the intrinsic value Slide 18-3 Copyright © McGraw-Hill Ryerson Limited, 2003 Bodie Kane Marcus Perrakis Ryan INVESTMENTS, Fourth Canadian Edition Time Value of Options: Call Option value Value of Call Intrinsic Value Time value X Slide 18-4 Stock Price Copyright © McGraw-Hill Ryerson Limited, 2003 Bodie Kane Marcus Perrakis Ryan INVESTMENTS, Fourth Canadian Edition Factors Influencing Option Values: Calls Factor Stock price Exercise price Volatility of stock price Time to expiration Interest rate Dividend Rate Slide 18-5 Effect on value increases decreases increases increases increases decreases Copyright © McGraw-Hill Ryerson Limited, .