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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.
Robert Litterman and Jose Scheinkman were the first to study how changes in the shapes of the yield curve affect the total return on the Treasury securities. The histor
suppose perfect competition prevails in the market for hotel rooms. the current market equilibrium price of a stanar hotel room is 100 per night
Q. What is Evaluation of Credit Policy? Evaluation of Credit Policy: - A credit policy is prepared to maintain the investment in receivables at optimum level. Receivable Turnov
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that the business has far fewer linens than it needs, so he makes a major linen purchase on open account. Which of the following terms refers to the fact that partners Ma and Runni
Start-Up Financing Capital provided to companies which have been in operation for less than one year to facilitate all phases of bringing their product to market.
Futures Contract It is an obligation to purchase or sell an asset at an agreed-upon price on an exact future date. The buyer commits himself or herself to buy the asset, and th
Q. Explain Net Present Value Method? Net Present Value (NPV) Method: - This process measures the Present value of returns per rupee invested. In this method present value of
Q. Illustrate Compound Value Concept? The Compound Value Concept is used to find out the FV of present money. It is the same as the concept of compound interest, wherein the in
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