CocaCola Harmless Warrants
Dont jump into the most complicated thing that comes your way understand the case
first.


Establish basic arbitrage relationships to price the embedded call and the warrant
The different ways to see the arbitrage opportunity
FNCE 238/738: Homework Assignment #2
Due on Monday, September 28 (by 9:00am) via CANVAS
Problem 1: Duration and Floating Rate Bonds
In December 1994, Orange County was forced to declare bankruptcy after sustaining losses on a portfolio
of leveraged invers
FNCE 238/738: Homework Assignment #4
For detailed computations please see the associated spreadsheet (HW4_Solutions.xls).
Problem 1: Asian Options
This problem explores the valuation of Asian options using binomial trees. The payoff on an Asian option
is
Corporate Governance
Class 12
For today
l Corporate
l
Governance & Takeovers
Read note on corporate control
l Special
office hours today: 4:30+
l No office hours tomorrow
l Thursday
l
l
l
l
Quiz (closed book)
More corporate governance
Money Market Instrum
Capital Markets
Bonds +
Schedule
l Today:
Bond review
l Intro to securities lending
l Quiz
l Tuesday: Combined class at 5PM
l
l
5PM Special Guest!
Keith Babbitt from KCG (formerly Knight Capital
Group)
l
l
Room F85
This replaces earlier classes.
2
Bond Re
Capital Markets
Order Placement
Strategy
For today
l Market
mechanics: Settlement
l Order placement strategy
l
Dark pools
l QUIZ
l Next
week:
l Tuesday: HW Due
l
High frequency trading and the Flash Crash
l Thursday:
l
Underwriting and the Facebomb IPO
2
Capital Markets: More
Bonds
1
Today
1.
2.
3.
Penns 100 year bond issue
Review and Preview Exercises
More bonds
1.
2.
Duration and Convexity
Arbitrage!
2
Thursday
l Quiz
l
l
l
l
l
#1
30 minutes
Open book and notes
Mostly short quant problems
Based on mater
Capital Markets
For today
More equity market structure
l Quiz #2
l Feb 18. 5 PM: Cromwell Coulson, CEO of
OTC Markets Inc.
l
l
Note new time!
2
Update
l
House passes 1 year extension of debt limit
l
Kicks can forward one year
3
Review
A random driveby co
Part I
A
T
y (cont)
y (semi)
Firm 1
D
b
l
m
s(e)
s(m)
s
dd
pD
200
5
2.2374%
2.2500%
100
1.00
5.00%
7.24%
15.00%
18.00%
23.43%
1.7517
3.99%
Firm 2
D
b
l
m
s(e)
s(m)
s
dd
pD
100
0.50
5.00%
4.74%
18.91%
18.00%
20.94%
1.7519
3.99%
Equity value
d1
d2
C
1.798
1
FNCE 238/738: Homework Assignment #3
For detailed computations please see the associated spreadsheet (HW3_Solutions_Fall2015.xls).
Part 1: Default probability vs. yield
Under the Merton model the probability that the firm will default at maturity is given
FNCE 238/738: Homework Assignment #1
Due on Thursday, September 10 (by 9:00am) via CANVAS
Problem 1: Law of One Price
Consider the following pricing data (captured on December 31, 2014) for three Treasury securities maturing
on August 15, 2015. The third
FNCE 238/738: Homework Assignment #1
For detailed computations please see the associated spreadsheet (HW1_Solutions_Fall2015.xls).
Problem 1: Law of One Price
Consider the following pricing data (captured on December 31, 2014) for three Treasury securitie
FNCE 238/738: Homework Assignment #5
Due on Tuesday, November 10 (by 9:00am) via CANVAS.
For both problems assume the principal balance of the underlying mortgage pool is $200MM. The WAC
of the mortgages in the pool is 3.75%, the coupon rates on the MBS s
FNCE 238/738: Homework Assignment #3
Due on Tuesday, October 13 (by 9:00am) via CANVAS.
Part 1: Default probability vs. yield
Under the Merton model the probability that the firm will default at maturity is given by =
(), where N(x) denotes the cumulative
FNCE 238/738: Homework Assignment #4
Due on Tuesday, October 27 (by 9:00am) via CANVAS.
Problem 1: Asian Options
This problem explores the valuation of Asian options using binomial trees. The payoff on an Asian option
is determined by the difference betwe
Capital Markets: Bonds
1
Today
l.Bonds
l.Review
and Preview Exercises
l.Thursday: 9:00 AM Guest speaker Stephen
Golding
l.
Penns VP of Finance and treasurer
l.
Penns 100 Year Bond Issue
Assignment:
l.Read prospectus
2
l
Especially summary (page 16, 1617
Capital Markets
For today
l More
equity market structure
l Quiz #2
l Feb 18. 5 PM: Cromwell Coulson, CEO of
OTC Markets Inc.
l
Note new time!
2
Update
l House
l
passes 1 year extension of debt limit
Kicks can forward one year
3
Review
A random driveby co
y~(5)
y(5)
A
EMRP
STDmkt
D
0.022374 Annaulized continuously compounded yield on the five year risk free zero
0.0225 Continuously compounded yield corresponds to a semiannally compounded zerocoupon yield
200
0.05
0.18
D
B
STDe
u
STD
dd
T
P(Default)
Firm
y~(5)
y(5)
A
EMRP
STDmkt
D
0.022374 Annaulized continuously compounded yield on the five year risk free zero
0.0225 Continuously compounded yield corresponds to a semiannally compounded zerocoupon yield
200
0.05
0.18
D
B
STDe
u
STD
dd
T
P(Default)
Firm
Syllabus
FINANCE 238/738: CAPITAL MARKETS
Spring 2015
Prof. Jakub W. Jurek
Office: 2454 Steinberg HallDietrich Hall
Email: jjurek@wharton.upenn.edu
Office hours: TBD.
COURSE DESCRIPTION:
The objective of this course is to give you a broad understanding o
The Return of
Securitization
For today
l Review
l
l
HW5
SEC Commissioner Gallagher and Chief
Economist Lewis
l Tomorrow:
l Next
l
l
NYSE/KCG Trip
week
Tuesday: Quiz!
More securitization!
2
Quiz Stats
Quiz 1
Median
Quiz 2
93
Quiz 3
91
88.4
Quiz 4
90 92.0
M
Capital Markets
Finance 238/738
Dr. James J. Angel, Ph.D.,
CFA
For today
l Course
logistics/ introductions
l Role of capital markets
l
l
What they do
Booms and busts
l Bloomberg
intro
l For next week:
l
l
Tuesday: Bonds; Review and preview exercises
due
T
Capital Markets Quiz # 1
Section number and time:
Name:
This quiz is CLOSED EVERYTHING, except you may use your financial calculator or calculator smartphone
app. In order to get full credit, you must show enough of your work that your answers can be
reco
Capital Markets
Venture Capital,
Underwriting, and the
Facebomb IPO (Lec 10)
For today
l Venture
capital and private equity
l Underwriters and IPOs
l Facebomb
l Next week
l
l
Tuesday: More IPO
Thursday: NYSEEuronext CEO Duncan
Niederaur at 10:30
2
Wall S
Securitization I
For today
l Review
l
l
Quiz
Money Market Funds
l Next
l
l
week
HW due Tuesday
More securitization!
2
Announcements
l HW
due Tuesday
l Tuesday: Special guest!
l
l
l
SEC Commissioner Dan Gallagher AND
SEC Chief Economist Craig Lewis!
All se