logging in or signing up A Simple Explanation of the OPM orchardpartners Download Post to : URL : Related Presentations : Share Add to Flag Embed Email Send to Blogs and Networks Add to Channel Uploaded from authorPOINT lite Insert YouTube videos in PowerPont slides with aS Desktop Copy embed code: (To copy code, click on the text box) Embed: URL: Thumbnail: WordPress Embed Customize Embed The presentation is successfully added In Your Favorites. Views: 56 Category: Business & Fin.. License: All Rights Reserved Like it (0) Dislike it (0) Added: June 20, 2010 This Presentation is Public Favorites: 0 Presentation Description No description available. Comments Posting comment... Premium member Presentation Transcript A Simple Explanationof theOption Pricing Method : A Simple Explanationof theOption Pricing Method Slide 3: Equity value today Future equity value Preferred only Common & Preferred Slide 4: Equity value today Preferred only Common & Preferred Future equity value The current value method assumes no change in equity value. Slide 5: Equity value today Preferred only Common & Preferred Future equity value The probability-weighted expected returns method assumes equity value will change estimates each future value associates a probability with each outcome. Slide 6: Preferred only Common & Preferred Future equity value The option-pricing method follows the same logic as PWERM but considers many more outcomes. Equity value today Slide 7: Preferred only Common & Preferred Future equity value The OPM generates a normal distribution of outcomes. The most likely outcomes are values close to today’s equity value. Slide 8: Preferred only Common & Preferred Future equity value Equity value today Volatility is one factor which determines the range of outcomes. Slide 9: Preferred only Common & Preferred Future equity value Equity value today Increasing the assumed level of volatility increases the payout to common. Slide 10: Preferred only Common & Preferred Future equity value Equity value today Increasing the life of the option also increases the payout to common. In summary : In summary The OPM and PWERM estimate common value based on a range of future values which are weighted by probability. The OPM considers a larger number of outcomes than PWERM and the probabilities are assumed to be normally distributed. Higher volatility and longer option lives increase the value of common. Slide 12: ORCHARD PARTNERS, INC. 339 Main Street Concord, MA 01742 978 369-8200 www.orchardpartnersinc.com You do not have the permission to view this presentation. In order to view it, please contact the author of the presentation.
A Simple Explanation of the OPM orchardpartners Download Post to : URL : Related Presentations : Share Add to Flag Embed Email Send to Blogs and Networks Add to Channel Uploaded from authorPOINT lite Insert YouTube videos in PowerPont slides with aS Desktop Copy embed code: (To copy code, click on the text box) Embed: URL: Thumbnail: WordPress Embed Customize Embed The presentation is successfully added In Your Favorites. Views: 56 Category: Business & Fin.. License: All Rights Reserved Like it (0) Dislike it (0) Added: June 20, 2010 This Presentation is Public Favorites: 0 Presentation Description No description available. Comments Posting comment... Premium member Presentation Transcript A Simple Explanationof theOption Pricing Method : A Simple Explanationof theOption Pricing Method Slide 3: Equity value today Future equity value Preferred only Common & Preferred Slide 4: Equity value today Preferred only Common & Preferred Future equity value The current value method assumes no change in equity value. Slide 5: Equity value today Preferred only Common & Preferred Future equity value The probability-weighted expected returns method assumes equity value will change estimates each future value associates a probability with each outcome. Slide 6: Preferred only Common & Preferred Future equity value The option-pricing method follows the same logic as PWERM but considers many more outcomes. Equity value today Slide 7: Preferred only Common & Preferred Future equity value The OPM generates a normal distribution of outcomes. The most likely outcomes are values close to today’s equity value. Slide 8: Preferred only Common & Preferred Future equity value Equity value today Volatility is one factor which determines the range of outcomes. Slide 9: Preferred only Common & Preferred Future equity value Equity value today Increasing the assumed level of volatility increases the payout to common. Slide 10: Preferred only Common & Preferred Future equity value Equity value today Increasing the life of the option also increases the payout to common. In summary : In summary The OPM and PWERM estimate common value based on a range of future values which are weighted by probability. The OPM considers a larger number of outcomes than PWERM and the probabilities are assumed to be normally distributed. Higher volatility and longer option lives increase the value of common. Slide 12: ORCHARD PARTNERS, INC. 339 Main Street Concord, MA 01742 978 369-8200 www.orchardpartnersinc.com