tailieunhanh - Lecture Fundamentals of corporate finance - Chapter 25: Options and corporate securities

After studying chapter 25 in the lecture, you should be able to: Give the definitions for a put option and a call option, be familiar with common stock option quotations, illustrate the payoffs from a put and call option at maturity, explain how to determine the upper and lower bounds on a call option's value, compute the value of a call option based on the assumption that it is certain that the option will finish in the money,. | Chapter Outline Chapter 25 Options and Corporate Securities Chapter Organization Options: The Basics Fundamentals of Option Valuation Valuing a Call Option Equity as a Call Option on the Firm’s Assets Warrants Convertible Bonds Reasons for Issuing Warrants and Convertibles Other Options Summary and Conclusions 25A The Black-Scholes Option Pricing Model CLICK MOUSE OR HIT SPACEBAR TO ADVANCE Irwin/McGraw-Hill copyright © 2002 McGraw-Hill Ryerson, Ltd. Option Terminology Call option The right to buy an asset at a fixed price during a particular period of time. Put option The right to sell an asset at a fixed price during a particular period of time. The opposite of a call. Striking price The fixed price in the option contract at which the holder can buy or sell the underlying asset. (Also the exercise price or the strike price.) Option Terminology Expiration date The last day on which an option may be exercised. Exercising the option The act of buying or selling the underlying asset via the option contract. American option An option that may be exercised at any time until its expiration date. European option An option that may only be exercised on the expiration date. A Sample Globe and Mail, Report on Business Option Quote (Figure ) Source: The Globe and Mail, Report on Business, July 6, 2000, p. B27. Used with permission Value of a Call Option at Expiration (Figure ) Stock price at expiration (S1) Call option value at expiration (C1) S1 E S1 > E Exercise price (E) 45 ° As shown, the value of a call at expiration is equal to zero if the stock price is less than or equal to the exercise price. The value of the call is equal to the stock price minus the exercise price (S1 - E) if the stock price exceeds the exercise price. Value of a Call Option Before Expiration (Figure ) Stock price (S0) Call price (C0) Exercise price (E) 45 ° Lower bound C0 S0 - E C0 0 Upper bound C0 | Chapter Outline Chapter 25 Options and Corporate Securities Chapter Organization Options: The Basics Fundamentals of Option Valuation Valuing a Call Option Equity as a Call Option on the Firm’s Assets Warrants Convertible Bonds Reasons for Issuing Warrants and Convertibles Other Options Summary and Conclusions 25A The Black-Scholes Option Pricing Model CLICK MOUSE OR HIT SPACEBAR TO ADVANCE Irwin/McGraw-Hill copyright © 2002 McGraw-Hill Ryerson, Ltd. Option Terminology Call option The right to buy an asset at a fixed price during a particular period of time. Put option The right to sell an asset at a fixed price during a particular period of time. The opposite of a call. Striking price The fixed price in the option contract at which the holder can buy or sell the underlying asset. (Also the exercise price or the strike price.) Option Terminology Expiration date The last day on which an option may be exercised. Exercising .

• Tài chính doanh nghiệp
• Corporate finance
• Fundamentals of corporate finance
• Tài chính doanh nghiệp
• Business organization
• Financial management
• Corporate securities