Analyzing project risks by making mechanical trial and error changes to forecast values of selected variables.Analyzing the risks of investment projects, by changing the values of forecasted variables.
Finding the values of particular variables which give the project a Breakeven NPV of zero.
Upon completion of this chapter you should understand: Calculating linear breakeven points; calculating nonlinear breakeven points; effect of changes in costs and revenue; strategies associated with capacity limits, expansion and profits; isocosts and breakeven between products;...
Strategy: Buy lower strike option, sell 2 higher strike options, and buy a higher strike option with the same expiration date (all calls or all puts). Market Opportunity: Look for a range-bound market that is expected to stay between the breakeven points. Maximum Risk: Limited to the net debit paid.
THE OPTIONS COURSE
FIGURE C.22 Long
Maximum Proﬁt: Limited. (Difference between strikes – net debit) × 100. Proﬁt exists between breakevens. Upside Breakeven: Highest strike – net debit. Downside Breakeven: Lowest strike + net debit.
In this chapter, risk is accounted for by (1) applying a discount rate commensurate with the riskiness of the cash flows, and (2), by using a certainty equivalent factor
In chapter 8, risk is accounted for by evaluating the project using sensitivity and breakeven analysis.
For instance, based on the pure management fee model
described above, a fund with a 1.5% management fee and
fixed expenses of $600,000 would break even at $40 mil-
lion in AUM. By decreasing fixed expenses by $60,000, or
10%, the fund’s breakeven AUM drops by $4 million to $36 million. Stated differently, $15,000 in fixed
expenses equates to $1 million in AUM.
When companies calculate their breakeven points, they often come at it from the perspective of how
much revenue they require to cover their expenses: “If we don’t sell $2 million worth of widgets this
year, we’ll face a shortfall and we’ll need to downsize.” Similarly, a hedge fund manager may ask:
“What level of assets and performance do I need to cover my expenses?”
However, the hedge fund business model allows for a different approach.
Thị trường Cơ hội: Hãy tìm một thị trường có biến động thấp, nơi bạn dự đoán một sự gia tăng biến động dẫn đến biến động giá cổ phiếu trong hai hướng vượt ra ngoài breakevens. Cổ ngắn và Chiến lược cuộc gọi Long: Bán 100 cổ phiếu của cổ phiếu cơ bản
các breakevens. Ưu điểm hòa vốn (2 × lựa chọn tấn công giá) - giá cổ phiếu cơ bản lúc khởi đầu] + net ghi nợ các tùy chọn. Nhược điểm hòa vốn: Giá của cổ phiếu cơ bản lúc khởi đầu - lưới ghi nợ các tùy chọn. Margin: Bắt buộc trên các chứng khoán ngắn.Long tổng hợp nằm giữa với cuộc gọi trường hợp học
Chapter 11: Pricing products and services. When you finish this chapter, you should: Describe the nature and importance of pricing and the approaches used to select an approximate price level; explain what a demand curve is and the role of revenues in pricing decisions; explain the role of costs in pricing decisions and describe how various combinations of price, fixed cost, and unit variable cost affect a firm’s breakeven point.