11 12 02 Review Session 8 _Concept Review_

11 12 02 Review Session 8 _Concept Review_ - Managerial...

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Managerial Finance: Review Session 8 TA: Pablo Villanueva December 2, 2011
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Agenda for Today 1. Forwards/Futures 2. Options Call Put Put-Call Parity Early Exercise Valuation
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Forwards/Futures 1. Forward is a contract that of an exchange of an underlying asset in the future, at a price determined today. 2. If the good is a stock with price S , price of forward F and time of sale t , the buyer of the forward gets S t - F t at time t . . The seller gets F t - S t at time t. There is no exhange at any other point in time. 3. F 0 = S 0 * (1 + r f ) t 4. Future is simply a forward exchanged in a organized exchanged. 5. In order to reduce credit risk, futures are paid via a marking to market. This means that very day, there is an exchange of cash as a function of the new price of the future. See question 30.6.
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1. A call option gives the owner the right (not the obligation) to buy and underlying asset at time t at the latest (or only at time t in case of European options), at the strike price K. 2.
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This note was uploaded on 01/08/2012 for the course MS&E 245G taught by Professor Perez-gonzalas during the Fall '11 term at Stanford.

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11 12 02 Review Session 8 _Concept Review_ - Managerial...

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