TAILIEUCHUNG - Lecture Investments (6/e) - Chapter 21: Option valuation

In this chapter, we turn our attention to option valuation issues. To understand most option valuation models requires considerable mathematical and statistical background. Still, many of the ideas and insights of these models can be demonstrated in simple examples, and we will concentrate on these. | Chapter 21 Option Valuation Intrinsic value - profit that could be made if the option was immediately exercised. Call: stock price - exercise price Put: exercise price - stock price Time value - the difference between the option price and the intrinsic value. Option Values Time Value of Options: Call Option value X Stock Price Value of Call Intrinsic Value Time value Factor Effect on value Stock price increases Exercise price decreases Volatility of stock price increases Time to expiration increases Interest rate increases Dividend Rate decreases Factors Influencing Option Values: Calls Restrictions on Option Value: Call Value cannot be negative Value cannot exceed the stock value Value of the call must be greater than the value of levered equity C > S0 - ( X + D ) / ( 1 + Rf )T C > S0 - PV ( X ) - PV ( D ) Allowable Range for Call Call Value S0 PV (X) + PV (D) Upper bound = S0 Lower Bound = S0 - PV (X) - PV (D) 100 200 50 Stock Price C 75 0 Call Option Value X = 125 Binomial Option .

• Quỹ đầu tư
• Investment environment
• Lecture Investments
• Active portfolio management
• Capital markets
• Option valuation
• Binomial option pricing
• Investment analysis
• Portfolio management
• Investment management
• Investment theory
• Investment companies
• Time value of money
• Doctoral thesis summary
• The impact of the investment environment
• Investment decisions
• Small and medium enterprises
• Investment decision of the business
• Characteristics of investment