When I set out to write this book, my topic was stock options.
Specifically, my intent was to explore the much debated issue of
expensing stock options. While that remains an essential theme of
this book, it is impossible to address stock options without looking
at the broader picture. Put another way, stock options are the trees;
executive compensation and effective corporate governance are the
“This is an excellent book for anyone interested in the important
discussion of stock option expensing and, more significantly, the
optimal use of stock options in compensation plans. It is written
from the point of view of an experienced and knowledgeable com-
pensation consultant who has advised board compensation com-
mittees and talked with many people outside the field considering
the economic and incentive effects of the overuse of stock options in
the 90s.”—John M. Biggs, former Chairman & CEO of TIAA-
Options involve risks and are not suitable for everyone. Prior to buying or selling options,
an investor must receive a copy of Characteristics and Risks of standardized Options.
Copies may be obtained by contacting your broker or the Options Industry Council at 440
S. LaSalle St., Chicago, IL 60605
In order to simplify the computations, commissions, fees, margin interest and taxes have
not been included in the examples used in these materials.
The math, the formulas, the problem solving . . . does corporate finance make your head spin? You're not alone. It's one of the toughest subjects for business students—which is why Corporate Finance DeMYSTiFieD is written in a way that makes learning it easier than ever.
This self-teaching guide first explains the basic principles of corporate finance, including accounting statements, cash flows, and ratio analysis. Then, you'll learn all the specifics of more advanced practices like estimating future cash flows, scenario analysis, and option valuation....
The long-awaited sequel to the "Concepts and Practice of Mathematical Finance" has now arrived. Taking up where the first volume left off, a range of topics is covered in depth. Extensive sections include portfolio credit derivatives, quasi-Monte Carlo, the calibration and implementation of the LIBOR market model, the acceleration of binomial trees, the Fourier transform in option pricing and much more. Throughout Mark Joshi brings his unique blend of theory, lucidity, practicality and experience to bear on issues relevant to the working quantitative analyst....
Basic principles underlying the transactions of financial markets are tied to
probability and statistics. Accordingly it is natural that books devoted to
mathematical finance are dominated by stochastic methods. Only in recent
years, spurred by the enormous economical success of financial derivatives,
a need for sophisticated computational technology has developed. For example,
to price an American put, quantitative analysts have asked for the
numerical solution of a free-boundary partial differential equation.
The CBOE normally sets the strike prices for its options so that they are spaced
$2.50, $5 or $10 apart. Stocks at lower prices have smaller spaces between strike
prices. When options with a new expiration date are introduced, the CBOE
usually introduces two or three options with strikes nearest to the current stock
price. If the price moves outside this range, new strikes may be introduced. For
example, if new October options are offered on a stock currently priced at $84,
then options striking at $80, $85 and $90 might be created.
The purchase of real estate can usually be regarded as a joint venture between an equity investor
and a lending institution. Very few occasions arise where properties are bought for all cash. In
most real estate transactions a lender provides a part of the financing, and the property is held as
security for the debt. There are two instruments involved when a real estate transaction involves
both debt and equity - the note and the mortgage.
After a few early isolated cases in the 1980s, since the mid-1990s hundreds of papers
dealing with economics and finance have invaded the physics preprint server
xxx.lanl.gov/cond-mat, initially devoted to condensed matter physics, and now
covering subjects as different as computer science, biology or probability theory.
When the market is not complete, there is a need to create new securities in order
to complete the market. One approach is to create derivative securities on the existing
securities such as European-type options.
A European call option written on a security gives its holder the right( not obligation)
to buy the underlying security at a prespecied price on a prespecied date; whilst a
European put option written on a security gives its holder the right( not obligation) to
sell the underlying security at a prespecied price on a prespecied date.
Financial markets have undergone tremendous growth and dramatic changes in the
past two decades, with the volume of daily trading in currency markets hitting over
a trillion US dollars and hundreds of billions of dollars in bond and stock markets.
Deregulation and globalization have led to large-scale capital flows; this has raised
new problems for finance as well as has further spurred competition among banks
and financial institutions.
Corporations must cope with fluctuations in interest rates, commodity prices, and exchange rates. This chapter discusses how they do it, with particular attention paid to financial instruments such as futures contracts, options, and swap agreements.
After studying chapter 25 in the lecture, you should be able to: Give the definitions for a put option and a call option, be familiar with common stock option quotations, illustrate the payoffs from a put and call option at maturity, explain how to determine the upper and lower bounds on a call option's value, compute the value of a call option based on the assumption that it is certain that the option will finish in the money,...
Chapter 19 - Options and contingent claims. This chapter include objectives: Understand the major types and characteristics of options and distinguish between options and futures; identify and explain the factors that affect option prices; understand and apply basic option pricing theorems, including put–call parity,…
This chapter design a plan to research and select a new or used automobile; decide whether to buy or lease a car; identify housing alternatives, assess the rental option, and perform a rent-or-buy analysis; evaluate the benefits and costs or homeownership and estimate how much you can afford to pay for a home; describe the home-buying process; choose mortgage financing that meets your needs.
All rights reserved. Except for the quotation of short passages for the purposes of criticism
and review, no part of this publication may be reproduced, stored in a retrieval system, or
transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or
otherwise, without the prior permission of the publisher.
Solve Two of the Toughest Problems When
Preparing for the Stockbroker’s Exam
Those wishing to become licensed as stockbrokers must
pass the series 7 examination. This exam, known officially
as the General Securities Registered Representative
Examination, is very rigorous. Traditionally, students
without a financial background have a difficult time with
the mathematical calculations peculiar to the world of
stocks, bonds, and options. Many are also relatively unfa-
miliar with proper use of the calculator and thus are dou-
bly hampered in their efforts to become registered.