Essays on Put Option

1. Rationale for Selection Investors require financial analysis of a company to make decisions. A financial report is significant for the purpose of providing information regarding the financial position of a company along with the risk factors associated with it. A report is prepared to provide clear and complete information about Apple Inc. that includes all relevant sections that are crucial for an investor. Apple Inc. is an American multinational company that follows GAAP (Generally Accepted Accounting Principles) to prepare financial statements and annual report for its stakeholders. Its financial analysis includes financial ratio analysis, stock price analysis, associated ...

Delta case describes the change in prices of options in financial security market of the underlying stock at the time of sale or towards its maturity period. Options used in security market are call options and put option. Delta explains the relationship between an option price and price of the underlying stock hence. In a call option, a rise in the price of an underlying asset results in a proportionate increase in the price of that same option. For a put option investors purchase their assets with an expectation of a fall in the future for the underlying instrument ...

Derivatives

Answer 1) In case, the company use 90-day forward contract, it will be required to pay: =300000*(0.40) = $120000

On the other hand, if it go by money market hedge, initially, it will invest:

=300000/1.03 = 291262 ringits In other words, in order to accumulate 300000 ringits in 90 days, the firm will need to deposit 291262 ringits presently. Henceforth, the firm will need to borrow, 291262* 0.404= $117,670 in the spot market.

The borrowed amount will be paid after 90-days with 4% interest, and this compute to:

= 117,670*(1.04) = $122,377 Therefore, by using the money market hedge, firm will need to pay $2377 more than the forward hedge. Hence, it should go for the forwar hedge

Answer 2)

Steps to hedge in the money market a) Borrow, 4000000/1.08= ...

China Stock Market and Currency

Shanghai Stock Exchange (SSE) is one of the largest stock markets in the world. The market has over a thousand listed companies, over 6700 listed securities, and over 1100 stocks. Chinese stock market has witnessed sporadic growth that is fueled by the fast economic growth that has been witnessed over the last thirty years. The economic growth was driven by the adoption of various economic reforms and opening up of China to the world. China is now integrated into the global economy and plays a major role in the stabilization of the regional and as well the world economy. ...

Reasons for the severe decline in Chinese Stock market in 2015

Between June 2014 and June 2015, the CSI 300 Index rose by 150%, reaching the peak at 5,166.3 on 12th June 2015. What follows was a severe decline in the stock index. Within just one month, the CSI 300 index had lost 30% to 3,507 on July 8. Several factors caused the fall.

Short selling

In the run-up to the stock market decline, investors were aggressively involved in short selling and margin trading. Short-selling and margin trading allowed investors to purchase shares using borrowed money thereby increasing the demand for stocks. Investors engaged in short-selling sell stocks borrowed from ...

International Finance

1 a. Discuss the corporate control of your business. Explain why your business in Mexico is exposed to agency problems. b. How would you attempt to monitor the ongoing operations of the business? c. Explain how you might be able to use a compensation plan that limits the potential agency problems? d. Assume that you have been approached by a competitor in Mexico to engage in a joint venture. The competitor would offer the classroom facilities (so that you would not need to rent classroom facilities), while your employees would provide the teaching. You would split the profits with ...