FM11_Ch_08_Show

FM11_Ch_08_Show - 8-1 CHAPTER 8 Financial Options and Their...

Info icon This preview shows pages 1–7. Sign up to view the full content.

View Full Document Right Arrow Icon
8 - 1 Financial options Black-Scholes Option Pricing Model CHAPTER 8 Financial Options and Their Valuation
Image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
8 - 2 An option is a contract which gives its holder the right, but not the obligation, to buy (or sell) an asset at some predetermined price within a specified period of time. What is a financial option?
Image of page 2
8 - 3 It does not obligate its owner to take any action. It merely gives the owner the right to buy or sell an asset. What is the single most important characteristic of an option?
Image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
8 - 4 Call option : An option to buy a specified number of shares of a security within some future period. Put option : An option to sell a specified number of shares of a security within some future period. Exercise (or strike) price : The price stated in the option contract at which the security can be bought or sold. Option Terminology
Image of page 4
8 - 5 Option price : The market price of the option contract. Expiration date : The date the option matures. Exercise value : The value of a call option if it were exercised today = Current stock price - Strike price. Note: The exercise value is zero if the stock price is less than the strike price.
Image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
8 - 6 Covered option : A call option written against stock held in an investor’s portfolio.
Image of page 6
Image of page 7
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern