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Topic: Valuation of options


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In the News (Wed 19 Jun 19)

  
 Resolution Economics – Services – Stock Valuation
Resolution Economics also provides stock option valuations for employers seeking assistance in valuing the stock options that may be awarded to new hires or current employees.
While regular earnings and bonuses can be expected to be within a specified range, the value of the stock options are dependent on the questions of when the options would be exercised and when the exercised shares would be sold.
As more stock options are awarded to employees below the executive ranks, there has been a significant increase in employment litigation where losses related to stock options are included as an element of damages.
www.resolutioneconomics.com /ser_sto.html

  
 Adams Capital, Inc. - Option Valuation Services
The value of options must also be disclosed in proxy statements and financial statement footnotes.
First, the company’s value must be determined by performing detailed financial analysis of the company and of comparable publicly traded companies.
Many companies reward their employees with stock options or bonus shares, which are taxable on issuance or at exercise.
www.adamscapital.com /stock_options.html

  
 Valuation (finance) - Wikipedia, the free encyclopedia
Valuations can be done on assets (e.g., investments in marketable securities such as stocks, options, business enterprises, intangible assets such as patents and trademarks) or on liabilities (e.g., bonds issued by a company).
For example, options are generally valued using the Black-Scholes model while the liabilities of life assurance firms are valued using the theory of present value.
In finance, valuation is the process of estimating the market value of a financial asset or liability.
en.wikipedia.org /wiki/Valuation_(finance)   (1430 words)

  
 Campbell R. Harvey's Identifying Real Options
The option valuation framework is particularly useful to the corporate strategist because it provides an integrative analysis of both operating and financial options associated with the combined investment and financing decisions.
The topic of real options applies the option valuation techniques to capital budgeting exercises in which a project is coupled with a put or call option.
Shutdown options are also valuable in farming (where they may be exercised if the cost of fertilizing, watering and harvesting exceeds the sale price of the product) and real-estate development (where they may be exercised if the cost of construction exceeds rent revenues).
faculty.fuqua.duke.edu /~charvey/Teaching/BA456_2002/Identifying_real_options.htm   (3662 words)

  
 MA310: Mathematics of Finance and Valuation
To introduce the main mathematical ideas involved in the modelling of asset price evolution and the valuation of contingent claims (such as call and put options) in a discrete and a continuous framework.
Calculation of the value of European put and call options (the Black-Scholes formula) using continuous time calculus and using discrete time approximation.
Reflection principle and the valuation of a look-back option.
www.maths.lse.ac.uk /Courses/ma310.html   (1517 words)

  
 MA310 Mathematics for Finance and Valuation
This course introduces the main mathematical ideas involved in the modelling of asset price evolution and the valuation of contingent claims (such as call and put options) in a discrete and a continuous framework.
Risk-neutral valuation of call and put options in the absence of arbitrage.
Main mathematical ideas in the modelling of asset price evolution and the valuation of contingent claims (eg calls, puts); discrete methods will dominate.
www.lse.ac.uk /resources/calendar/courseGuides/2003_MA310.htm   (1517 words)

  
 Our People
Based on option valuation techniques proven in the financial markets, Real Options Valuation (ROV) is revolutionizing corporate strategy and bridging the gap between finance and strategic planning.
At the Real Options Group we are committed to help managers embrace and capitalize on uncertainty by understanding how a dynamic and contingent approach to future investment decisions can enhance shareholder value in an uncertain world.
Our goal is to provide comprehensive real options-based enterprise package solutions to assist our clients both in creating value through their internal operations on Main Street as well as realizing value on Wall Street.
www.rogroup.com   (320 words)

  
 Option pricing models (Black-Scholes model & Binomial model) & Calculators
The option prices at each step are used to derive the option prices at the next step of the tree using risk neutral valuation based on the probabilities of the stock prices moving up or down, the risk free rate and the time interval of each step.
Both models are based on the same theoretical foundations and assumptions (such as the geometric Brownian motion theory of stock price behaviour and risk-neutral valuation).
And you can also use the on-line stock price probability calculator to look at the probabilities of stock prices exceeding upper and lower boundary prices-- both at the end of a specified number of days and at any time during the period.
www.hoadley.net /options/BS.htm   (3570 words)

  
 Our Strategic Finance Services case studies - Commercial valuation
We valued the different operational divisions of the subject company, to assist the lenders in better understanding their exposure and options under a refinancing
We offered ranges of values under different scenarios to enable them to consider their options in a more informed manner
– applied the DCF valuation methodology based on sensitised cash flow figures and analysed the assumptions behind those projections to assess the value beyond the explicit cash flow period (“the value into perpetuity” or “terminal value”)
www.ey.com /global/content.nsf/WebPrint/6F96B5005BA8097A80256CB80046AA9C?openDocument&   (288 words)

  
 Venture Momentum Article - The Mechanics of Preferred Stock Financing
Please note how the entire option pool is included in the computation of the valuation although not all options in the pool have been granted, and not all options granted have been exercised.
Please note that the valuation of an early stage startup is often driven by qualitative considerations from the investor's point of view, especially in a buyer’s market.
Its post-money valuation is $3,750,000, the sum of the pre-money valuation and the amount invested.
www.venturemomentum.com /preferredfinancing.html   (855 words)

  
 EECB-S2003-Week 10-Conference
The convertible preferred stock to be issued to ABC Investors will be converted into that number of common shares that will constitute 33% of the fully diluted shares (assuming that all stock options are issued and exercised).
Accordingly, the post-money valuation after the friends and family invested was $2.5 million.
After this investment, the company's common stock is held: 20% by the friends and family investors (who will not be contributing any additional dollars); 60% held by the 3 founders; 20% set aside for stock options.
vls.law.vill.edu /prof/cohen/Web/Ecommerce/EECB-S2003/eweek10.html   (855 words)

  
 Venture Capital Journal
The deal is valued at about $200 million in cash and options, and is expected to close in Cisco's first fiscal quarter of 2005.
The deal is valued at about $75 million, including $72 million in cash and the assumption of employee stock options.
The deal is valued at approximately $55 million in cash, plus the assumption of around $3.8 million in outstanding debt.
www.ventureeconomics.com /vcj/protected/1093015905651.html   (855 words)

  
 Courses
Topics include pensions accounting, inventory valuation, leases, deferred taxes, accounting for stock options and more.
The course also covers the mechanics of Black-Scholes Model for pricing options and the binomial options pricing model.
Bus 30116 Accounting and Financial Analysis I - This course is useful for those interested in interpreting the impact on the firm's financial statements of economic events affecting asset valuation, revenue recognition and others.
gsbwww.uchicago.edu /student/finance/courses.html   (482 words)

  
 Recent Literature on Contingent Valuation Methods
The paper compares this multiattribute valuation method to contingent valuation surveys, describes the sequence of respondents' tasks, and presents results from a case study comparison of contingent valuation and value- integration survey methods in the context of valuing options for fire control in Oregon's old-growth forests.
Environmental value or benefit transfer is a technique in which the results of studies on monetary environmental valuation are applied to new policy contexts.
We conclude by noting that the debate over the "value of valuation" in water resources will not subside, because this debate is part of a wider intellectual dialogue regarding the role of analysts and quantification in the making of public policy.
www.sscnet.ucla.edu /ssc/labs/cameron/nrs98/cvinv.htm   (19241 words)

  
 World of Real Options - Creating Value in an uncertain environment
Concerning the valuation of Real Options we can use the same techniques as for standard options.
Real Option Analysis gives a better understanding of the expected value that investments into an uncertain environment can generate, as it is able to capture managerial flexibility inherent in the project.
A real option is the right - but not the obligation - to acquire the gross present value of expected cash flows by making an irreversible investment on or before the date the opportunity ceases to be available.
www.world-of-realoptions.com   (267 words)

  
 CFO Europe
Real options analysis is based on the observation, first made more than 20 years ago, that a company evaluating an existing asset or potential investment is in much the same position as the holder of a financial option, such as those written on stocks or commodity prices.
Real options practitioners have to overcome two major obstacles: first, they have to find a number to put on the real option value; and second, they have to persuade their organisations to change the way they think about valuation and investment.
www.cfoeurope.com /199908e.html   (6111 words)

  
 Optimize Magazine > Financial Management > Real Options, Real Opportunities > January 2002
Real assets can be evaluated using techniques developed for financial options, such as the Black and Scholes model (a mathematical holy grail for determining the fair value of options that earned its creators the 1997 Nobel Prize in Economics), or the Cox, Ross, and Rubinstein methodology, also a form of option valuation.
Real options offer another valuable comparison with financial investing: that holding a diverse portfolio of stocks is less risky than owning one stock.
Three things influence the price of stock options: the spread between the current price and the exercise price, the length of time for which the option is good, and the volatility of the stock in question.
www.colorado.edu /engineering/alleman/print_files/pr_financial.html   (2523 words)

  
 Stock Option Valuation
In practice, the value that matters for people who hold employee stock options is the subjective value of the option: the value of the option to you.
The value of a stock option is the sum of its intrinsic value and its time value.
Remember, the theoretical value of the option may be quite a bit higher, but $6,000 is a reasonable figure for the value of the option to you.
www.fairmark.com /execcomp/valuation.htm   (2523 words)

  
 Real Options : : About the Book : : Endorsements
This book provides and excellent introduction to this "real options way of thinking." The authors eschew a highly mathematical approach, and instead present the concepts behind real options analysis in simple, intuitive terms in order to appeal to a wider audience.
I would highly recommend this book to people who are similarly frustrated by their current management tools, which fail to capture the nuances of the strategic decisions they face.
While a real options approach may be intuitive for technology firms, the authors illustrate its application to valuing startup firms, vacant land, oil exploration, and licensing.
www.real-options.com /about_endorse.htm   (2017 words)

  
 Finance
Valuation (DCF and CAPM); valuation under certainty, uncertainty; financial structure, cost of capital; dividend policy; firm investment in perfect, imperfect capital markets; options pricing theory; state preference model.
Valuation of financial securities using cases and financial information technology; macroeconomic and industry analysis, regulatory analysis, financial statement analysis, technical analysis, trading securities, active portfolio management, performance evaluation.
Valuation of financial securities (primarily equities) using discounted cash flow model; industry, regulatory analysis; financial statement analysis; active portfolio management; value-based management techniques; valuation of firms outside the United States.
www.registrar.uiowa.edu /registrar/catalog/TippieCollegeofBusiness/FinanceCourses.html   (1105 words)

  
 MA310: Mathematics of Finance and Valuation
To introduce the main mathematical ideas involved in the modelling of asset price evolution and the valuation of contingent claims (such as call and put options) in a discrete and a continuous framework.
These are contracts which are bought or sold in exchange for the promise of some kind of payment in the future, usually contingent upon the share-price then prevailing (of a specified share, or share index).
This is an introduction to an exciting and relatively new area of mathematical application.
www.maths.lse.ac.uk /Courses/ma310.html   (1105 words)

  
 Real Options
The proceedings of the Real Options Forum, held in the Centre on June 22nd 1999, are now available in PDF format from the real options forum page.
Real option valuation uses contingent claims analysis to value irreversible investments with uncertain payoffs.
The Centre, in association with the Real Options Group, held the 4th International Conference on Real Options:Theory Meets Practice from July 5th-8th 2000 in the Judge Institute.
www-cfr.jims.cam.ac.uk /research/real.html   (314 words)

  
 Using Real Options Software to Value Complex Options by Jonathan Mun
The real options approach incorporates a learning model, such that management makes better and more informed strategic decisions when some levels of uncertainty are resolved through the passage of time.
The real options models included in the software are American options, European options, barrier options, contraction options, expansion options, stochastic timing options, switching options, two-asset correlation options, et cetera, all driven in an easy-to-use graphical user interface.
Suppose the sum of the present value of the future cash flows is $100 million for the oral version, using a standard discounted cash flow model forecast out 5 years with a lump sum terminal valuation at the end of 5 years.
www.fenews.com /fen27/RealOptions.html   (2584 words)

  
 Business Valuation / BEAR Business Equity Appraisal Reports, Inc.
In addition to valuations of common equity, BEAR prepares valuations of stock options, preferred stock, corporate notes, and limited partnership interests.
Perhaps half of our valuations are for estate or gift purposes, approximately 10% are for ESOPs, and a significant fraction of our work is directly for SBA lenders in business sales transactions.
Over the past 16 years we have performed over 6,000 valuations of business interests.
www.bearval.com   (184 words)

  
 BizBuySell: Business Valuation
Gain insight on business valuation rules of thumb and why we use them.
Author and business broker, Russell Brown offers some tips on business valuation.
Options for financing the sale of your business.
www.bizbuysell.com /guide/sellval.htm   (101 words)

  
 Net Stock Valuation Calculator
If you think that the expected discount rate on the stock should be.10 per year, then the 159 million shares outstanding (assuming that no options are exercised) have a value today of about $37.
Since the payoff from investing in a growth stock is some years in the future, it is necessary to discount the future value of the stock to find out what it is worth today.
This means that the "upside" of the stock could be spread among at least 210 million shares, not 159.
www.msb.edu /faculty/angelj/netstock.ssi   (101 words)

  
 The Fed Model And Stock Valuation: What It Does And Does Not Tell Us
This dynamic may explain why the bulls have had an easier ride, since many asset allocation models are driven by Fed Model valuations or some variation of it, and that would indicate a shifting to stocks from bonds.
When the stock market was reaching record new highs in 1999 and 2000, many stock valuation models began sounding the alarm - flagging what in hindsight proved to be an extremely overvalued stock market.
So stocks are still "cheap." But when we take a look at absolute value comparisons, such as the earnings yields of the SandP 500 relative to past levels, we get a very different story.
www.investopedia.com /articles/03/112703.asp   (101 words)

  
 Bond Valuation Books
Advanced Monte Carlo simulation models for the valuation of bonds and options on bonds as well as risk assessments on portfolios of bonds under conditions of correlated interest rate and credit risk are demonstrated.
For added value and ease of reference, this high-level one-volume encyclopedia is divided into seven sections detailing virtually every aspect of high-yield bond investment.
HIGH-YIELD BONDS will provide you with a valuable reference to this fascinating and constantly changing class of securities, helping you assemble a stable, diversified portfolio of fixed income investments that provides the greatest returns and the lowest risks.
www.excelbusinesstools.com /books.asp?q=Bond%20Valuation   (1260 words)

  
 Proof for Corporate Finance: Valuation, Capital Budgeting & Investment Policy Vol. 8, No. 18
Particularly, the strategic value of a joint venture and the value of flexibility that stems from a less than full commitment can be determined using options valuation.
We accept abstracts of working papers in Corporate Finance: Valuation, Capital Budgeting & Investment Policy whose topics suit the coverage of the journal and which are part of the worldwide scholarly discourse.
Proof for Corporate Finance: Valuation, Capital Budgeting and Investment Policy Vol.
papers.ssrn.com /sol3/sample_issues/137272.html   (1510 words)

  
 MBA Course Descriptions
Several topics will be discussed, including securities markets, valuation of securities such as fixed-income securities, common stocks, options and futures, portfolio analysis, asset pricing models, investment companies, performance evaluation, and global diversification.
The objectives are to understand the economic role of MandA activities, to conduct valuation analysis to evaluate the impacts of a potential merger, to learn about the mechanics of transactions and to obtain knowledge about empirical regularities such as stock market reactions to MandA transactions.
The course continues by considering the valuation of international investments and the opportunities for international corporations in global debt and equity financing, e.g.
www.kenan-flagler.unc.edu /Faculty/academicarea/finance/MBA_Concentrations/MBA_Courses_/mba_courses_.html   (2167 words)

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