logo

Financial Securities Analysis | Assignment

9 Pages2522 Words257 Views
   

Added on  2021-01-02

Financial Securities Analysis | Assignment

   Added on 2021-01-02

ShareRelated Documents
FINANCIALSECURITIESANALYSISCOURSEWORK
Financial Securities Analysis | Assignment_1
Table of ContentsINTRODUCTION...........................................................................................................................1PART 1: FINANCIAL SECURITIES ANALYSIS........................................................................1Determinants in Exercising Options related Decisions...............................................................1Option Valuation: Minimum and Maximum..............................................................................2PART 2: HEDGING FUEL PRICES..............................................................................................3Pros..............................................................................................................................................3Cons.............................................................................................................................................5PART 3: CAPITAL ASSET PRICING MODEL (CAPM).............................................................5CONCLUSION................................................................................................................................6REFERENCES................................................................................................................................7
Financial Securities Analysis | Assignment_2
INTRODUCTIONFinancial Securities Analysis refers to the critical evaluation of tradable financialinstruments such as equities, debt securities or combination of both (Kevin, 2015). This reportaims to provide a detailed account in regards to Employee Stock Options and their valuations,ascertaining of minimum and maximum value that facilitate the decision of whether to exercisean option or not. In addition to this, the concept of fuel hedging and its related pros as well ascons have been explored. Along with this, application of Capital Asset Pricing Model (CAPM)has been used to ascertain whether the share price of a company is over-priced, under-priced orat par. PART 1: FINANCIAL SECURITIES ANALYSISEmployee Stock Options Scheme is an incentive-based method used by many companiesto provide rewards to their hard-working employees. A share option is one which is a right topurchase a definite number of shares at a future date for a fixed price within an organization(Carpenter, Stanton and Wallace, 2012).Determinants in Exercising Options related DecisionsThe main deciding factors for taking a decision regarding Employee Stock Optionsinclude volatility, expiration period, risk free interest rates, strike price and the price ofunderlying assets, which here relates to common stock of Ocean Cuisines PLC. These Optionscan be further segregated into Intrinsic and Extrinsic Values (Time Value). The followinginformation has been provided:Strike Price at the time of buying shares = £65Exercise Price = Current Stock (Underlying) Price (at the end of 3 years) = £55Volatility = Annual Average Standard Deviation = 0.25 or 25%Risk-Free Interest Rate = Yield on Treasury Note with 3 year expiration period = 0.034 or 3.4%Time to Expiration = 3 yearsDividend Payouts = Zero These factors are the main determinants which define whether or not to exercise thefunctions regarding any option, which in this case is of Call Option Type as the Employee StockOption scheme provides the option to buy shares at the end of vesting period. 1
Financial Securities Analysis | Assignment_3

End of preview

Want to access all the pages? Upload your documents or become a member.

Related Documents
Finance Assignment | Risk Financing and Insurance
|8
|2812
|387

Hedging - Advantages and Disadvantages of Aviation Fuel Hedging
|10
|2393
|214

Fuel Hedging in Airline Industry: Pros and Cons
|11
|3178
|479

Assignment Multiple Choice Question
|18
|4582
|22

Analysis of Spread Strategies in Derivative Market
|9
|2330
|266

Financial Risk Management: Collar and Straddle Option Strategies
|6
|1298
|475