Differance between forward start option and a package, Financial Management

Assignment Help:

1 Explain the difference between a forward start option and a package.

Outperformance certificates are offered to investors by many European banks as a way of investing in a company's stock. The initial investment equals to the stock price, S0. If the stock price goes up between time 0 and T, the investor gains k times the increase at time T, where k is, the stock price used to calculate the gain at time T is capped at some maximum level M. If the stock price goes down, the investor's loss is equal to the decrease. The investor does not receive dividends.

a) Show that an outperformance certificate is a package.

b) Calculate the value of a one-year outperformance certificate when the stock price is 50 pounds, k=1.5, M=68 pounds, the risk-free rate is 4.5%, and the stock price volatility is 23%. Dividends equal to 0,5 pounds are expected in 2 months, 5 months, 8 months, and 11 months.

 


Related Discussions:- Differance between forward start option and a package

Bonds/debentures, Bond are formal certificates issued by the companie...

Bond are formal certificates issued by the companies or government agencies acknowledging the indebtedness. To the investors, they are proofs of investment. In th

Explain how management goals are incorporated into pro forma, Explain how m...

Explain how management goals are incorporated into pro forma financial statements. Management locates a target goal, and forecasters produce pro forma financial statements within

Non-agency mortgage backed securities, The mortgage-backed securiti...

The mortgage-backed securities dealt with till now are agency mortgage backed securities. There are other MBS which can be for any kind of real estate property.

Financial equivalent of the balance, The Federal Minister for the Environme...

The Federal Minister for the Environment is worried about the Greenhouse Effect, one outcome of which would be that Adelaide would have a subtropical climate by the year 2015. This

Structure and organization of treasury , I am looking for assignment help o...

I am looking for assignment help on the topic Structure and Organization of Treasury. It would be great if anyone help me.

Receivables management, Receivables Management The decision on whether...

Receivables Management The decision on whether to grant or not to grant credit to a particular customer can be taken if certain subjective probabilities of the payment pattern

What do you mean by treasury bills, What do you mean by treasury bills? ...

What do you mean by treasury bills? In between government debt instruments are Treasury bills. Such are money market securities, along with an original maturity of less than on

What is inventory turnover, What is Inventory turnover The shortcoming ...

What is Inventory turnover The shortcoming of this ratio is that average calculation based on beginning and year-end inventory may not represent actual average in year. Other l

Future value, you just started your first job, and you want to buy a house ...

you just started your first job, and you want to buy a house within 3 years. you are currently saving for the down payment. you plan to save $5,000 the first year. You also anticip

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd