Got a tricky question? Receive an answer from students like you! Try us!

Option Pricing Model in Valuing a Company in the Context of Pfizer - Dissertation Example

Only on StudentShare
Author : demmerich
Finance & Accounting
Pages 40 (10040 words)


Option Pricing Model in Valuing a Company in the Context of Pfizer By [Name of student] [Presented to] [Name of institution] [Date] ACKNOWLEDGEMENT Knowledge is in the end based on acknowledgement- Ludwig Wittgenstein The support and cooperation of others in any act is highly appreciated especially when final objectives are accomplished…

Extract of sample
Option Pricing Model in Valuing a Company in the Context of Pfizer

His constant guidance and positive attention helped researcher to concentrate more on the research topic. The researcher would also like to thank his other professors for acting as a support system when required along with helping and guiding when needed and required. The support and cooperation of the University in allowing access to the library helped in referring to different study materials that further help in understanding the research topic in a sound manner. The researcher would also like to thank his family for being there as a strong support system often guiding and supporting along with enhancing the level of motivation and excitement through kind and positive feedback. The researcher feels blessed to have friends who not only shared their views and opinions on the research topic bust also brainstormed to add more value to the research topic. Overall, the researcher would like to acknowledge the efforts and support of everyone playing an important role in the entire research process. Without the support and cooperation of above mentioned people, the research would have been an aimless journey lacking depth and understanding. The researcher expresses his deep gratitude for all the support and guidance along with being thankful to everyone for being so kind and supportive throughout the research journey. ...
Download paper

Related Essays

Finance and Accounting Essay: Option Pricing
The loss that amounts is in the loss of cash or amount paid for the option. Determinants of an option are stated as stock price, volatility, strike price, risk free (short term) interest rate and time to the expiration. The contract in this case, is called the option contract (Don, 2004, 142). Options are used by holders for leverage or for protection. The leverage function helps the holder to control the shares bought for a portion what they would have cost. On the other hand, protection measures are adopted when the holder wants to guard against price fluctuations. He enters in to a contract…
12 pages (3012 words)
Option Pricing Theory
An option provides the buyer the right to buy or sale the quantity of goods he or she wants at a fixed price known as the strike price. Since the process of buying an option is optional, the holder can choose not to buy or sale the assets. There are two options these are; right to buy and right to sale. Options can come in several varieties like; a put option, gives the seller an underlying price to sale an option (Bostock, 2004). A call option gives its holder the right to buy an option on its set price; these options depend on when the option is offered. Therefore, the paper aims at giving a…
8 pages (2008 words)
Capital Asset Pricing Model
This model has been heavily criticised and debated over the past decades, and many of the economists are of the opinion that this framework is not adequate enough to assess various risk factors comprehensively. However, none of the opponents could introduce a potential alternative to this concept till date. This paper will critically analyse the applicability of the CAPM in corporate finance applications in the context of modern business environment. Corporate applications of CAPM Hillier et al (2008, section 5.1) provide a detailed view of the corporate applications of the capital asset…
7 pages (1757 words)
Outline and discuss the Capital Asset Pricing Model (CAPM) as means of valuing securities and their risk. What are the drawbacks
Some other financial experts like Lintner and Mossini also explained and purified CAPM and its interpretation in later years (Gassen, and Sellhorn, 2006). Capital Asset Pricing Model Being a quantitative tool for computing the yield of a security, CAPM is used for pricing the financial asset through mathematical calculations (Fields and Vincent, 2001). There are three main components of CAPM model which are stated as follows: Rf = Risk-free rate Beta = Risk of individual security with respect to market Rm – Rf = Market Risk Premium Risk-free Rate Risk free rate is considered as the rate at…
8 pages (2008 words)
CAPM (Capital Asset Pricing Model)
and expected returns which is denoted as r. The ? is used as a measure of non diversified risk and implies that the expected return is the return on a risk free asset in addition to a risk premium (Laubscher, 2002). The risk premium will be equivalent to the market return in surplus of the risk free rate which is multiplied by the share portfolio. This is the reason that ? is regarded as the difference between the returns on various share portfolio. The formula for CAPM model is denoted below: R = Rf + ?(Rm - Rf) R = Expected return on the share/portfolio. Rf = Risk-free rate of return. ? =…
7 pages (1757 words)
The Capital Asset Pricing Model
The equation that is applied in the calculation of CAPM for the assets is as follows: E(Ri) =RF +?i [E(RM) - RF] Where, E (Ri) = expected return of the ith level. Rf = risk-free return of an asset (such as short-term government securities), ?i = beta coefficient of ith level, and (RM) = Expected return on the market. The main aim of the CAPM model underlies the identification of the market portfolio as the tangency portfolio between supply and demand in balance. However, there are several theoretical limitations that have hindered the operations of the model, in the manner that these…
4 pages (1004 words)
Capital Asset Pricing Model
Usually, the overall volatility of the market is measures through proxies when implementing this model, for instance, the use of FTSE index. Such proxies are not usually the true measures of the market volatility which is at the core of the CAPM assumptions. Therefore, the model estimations from CAPM with use of market proxies for volatility can only predictions that are approximates and not the accurate measures of risk and return relationships. Another unrealistic assumption the CAPM model makes is the existence of a free risk security. In reality, there is not security that is free from…
4 pages (1004 words)