Definition of 'Black-scholes Model' - The Economic Times

Never miss a great news story! Get instant notifications from Economic Times Allow Not now. Management buyout MBO is a type of acquisition where a group led by people in the current management of a company buy out majority of the shares from existing shareholders and take control of the company. For example, company ABC is a listed entity where the management has a 25 per cent holding while the remaining portion is floated among public shareholders. In the case of an MBO, the current.

QIP or Qualified Institutional Placement is largely a fund raising tool for the listed companies. QIP is a process which was introduced by SEBI so as to enable the listed companies to raise finance through the issue of securities to qualified institutional buyers QIBs. Earlier, since raising finance in the domestic market involved a lot of complications, Indian companies used to.

Hedge fund is a private investment partnership and funds pool that uses varied and complex proprietary strategies and invests or trades in complex products, including listed and unlisted derivatives. Put simply, a hedge fund is a pool of money that takes both short and long positions, buys and sells equities, initiates arbitrage, and trades bonds, currencies, convertible securities, commodities a.

Black-Scholes is a pricing model used to determine the fair price or theoretical value for a call or a put option based on six variables such as volatility, type of option, underlying stock price, time, strike price, and risk-free rate. The quantum of speculation is more in case of stock market derivatives, and hence proper pricing of options eliminates the opportunity for any arbitrage. Required Rate of return is the minimum acceptable return on investment sought by individuals or companies considering an investment opportunity.

Investors across the world use the required rate of return to calculate the minimum return they would accept on an investment, after taking into consideration all available options. When calculating the required rate of return, investors lo. Prices of commodities, securities and stocks fluctuate frequently, recording highest and lowest figures at different points of time in the market. It is an important parameter for investors as they compare the current tradi.

For raising funds, it is not always preferable or feasible for a company to issue securities to the public at large as it is time consuming as well as an expensive option.

In such situations, the securities can be offered to a comparatively sm.

Basis Risk is a type of systematic risk that arises where perfect hedging is not possible. Basis is simply the relationship between the cash price and future price of an underlying. Net worth is the difference between the asset and the liability of an individual or a company. A high net worth relates to good financial strength and ultimately good credit rating of an individual or a company.

Similarly a low or negative net worth will relate to a weaker financial strength and a lower credit rating, thus directly affecting the individual's or the company's ability. Insider trading is defined as a malpractice wherein trade of a company's securities is undertaken by people who by virtue of their work have access to the otherwise non public information which can be crucial for making investment decisions.

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Black-Scholes: Robert Merton on the Options Pricing Model - Bloomberg

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Suggest a new Definition Proposed definitions will be considered for inclusion in the Economictimes. Binary Options A binary option is a type of derivative option where a trader makes a bet on the price movement of an underlying asset in near future for a fixed amount.

Block Deal Block deal is a single transaction, of a minimum quantity of five lakh shares or a minimum value of Rs 5 crore, between two parties. There are two important models for option pricing - Binomial Model and Black-Scholes Model.

The model is used to determine the price of a European call option, which simply means that the option can only be exercised on the expiration date. Black-Scholes pricing model is largely used by option traders who buy options that are priced under the formula calculated value, and sell options that are priced higher than the Black-Schole calculated value 1. The formula for computing option price is as under 2: Not to be Missed Why the Indian Insolvency and Bankruptcy code will not solve the problem of bad loans.

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Option Pricing Models (Black-Scholes & Binomial) | Hoadley

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