corporate financial theory 9 公司财务理论

,Derivatives & Options,Historical 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 derivative,Options,TerminologyDerivatives - 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 within 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 above the intrinsic value,Options,TerminologyExercise 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 - 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=2,Option Obligations,Option Value,The value of an option at expiration is a function of the stock price and the exercise price.,Option Value,The 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 $85,Options,CBOE Success1 - Creation of a central options market place.2 - Creation of Clearing Corp - the guarantor of all trades.3 - Standardized expiration dates - 3rd Friday4 - Created a secondary market,Options,Components 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 money (discount rate),Black-Scholes Option Pricing Model,OC = PsN(d1) - SN(d2)e-rt,Black-Scholes Option Pricing Model,OC = PsN(d1) - SN(d2)e-rt,OC- Call Option PricePs - Stock PriceN(d1) - Cumulative normal density function of (d1)S - Strike or Exercise price N(d2) - Cumulative normal density function 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 returns,(d1)=,ln + ( r + ) t,PsS,v22,v t,32 34 36 38 40,Cumulative Normal Density Function,N(d1)=,Cumulative Normal Density Function,(d1)=,ln + ( r + ) t,PsS,v22,v t,Cumulative Normal Density Function,(d2) = d1 -,v t,Call Option,ExampleWhat is the price of a call option given the following?. P = 36r = 10%v = .40S = 40t = 90 days / 365,Call Option,ExampleWhat is the price of a call option given the following?. P = 36r = 10%v = .40S = 40t = 90 days / 365,(d1) =,ln + ( r + ) t,PsS,v22,v t,(d1) = - .3070,N(d1) = 1 - .6206 = .3794,Call Option,.3070= .3= .00= .007,Call Option,ExampleWhat is the price of a call option given the following?. P = 36r = 10%v = .40S = 40t = 90 days / 365,(d2) = - .5056,N(d2) = 1 - .6935 = .3065,(d2) = d1 -,v t,Call Option,ExampleWhat is the price of a call option given the following?. P = 36r = 10%v = .40S = 40t = 90 days / 365,OC = PsN(d1) - SN(d2)e-rt,OC = 36.3794 - 40.3065e - (.10)(.2466),OC = $ 1.70,Put - Call Parity,Put Price = Oc + S - P - Carrying Cost + Div.,Carrying cost = r x S x t,ExampleIBM 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 put price?,Put - Call Parity,ExampleIBM 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 put price?,Put - Call Parity,Op = Oc + S - P - Carrying Cost + Div.Op = 4 + 40 - 41 - (.10x 40 x .50) + .50Op = 3 - 2 + .5Op = $1.50,Warrants & Convertibles,Review 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 dividends 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.,Option Strategies,Option Strategies are viewed via charts.How do you chart an option?,Stock Price,ProfitLoss,Option Strategies,Long Stock Bought stock Ps = 100,Option Strategies,Long Call Bought Call Oc = 3 S=27 Ps=30,Option Strategies,Short Call Sold Call Oc = 3 S=27 Ps=30,Option Strategies,Long Put = Buy Put Op = 2 S=15 Ps=13,Option Strategies,Short Put = Sell Put Op = 2 S=15 Ps=13,Option Strategies,Synthetic Stock = Short Put & Long Call Oc = 1.50 Op=1.50 S=27 Ps=27,P,/,L,P,s,2,7,3,0,2,4,-,1,.,5,0,+,1,.,5,0,Option Strategies,P,/,L,P,s,2,7,3,0,2,4,-,1,.,5,0,+,1,.,5,0,Synthetic Stock = Short Put & Long Call Oc = 1.50 Op=1.50 S=27 Ps=27,Option Strategies,Synthetic Stock = Short Put & Long Call Oc = 1.50 Op=1.50 S=27 Ps=27,Option Strategies,Why?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.,Corporate Options,Ch 213 types of “Real Options”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 option,Example - 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 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 Options,Example - 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 offer (i.e. the put option) and what is the most Mrs. Mulla could charge for the option?,Corporate Options,Year 0Year 1Year 2 120 (.6) 100 (.6) 90 (.4)NPV = 145 70 (.6) 50 (.4)40 (.4),Example - 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