Chapter 6 - Equities and Derivative Investments Flashcards Preview

CWM 1 - Financial Markets > Chapter 6 - Equities and Derivative Investments > Flashcards

Flashcards in Chapter 6 - Equities and Derivative Investments Deck (12)
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1

TERP

Theoretical ex-rights price

Cum rights price * ratio/ + Rights price/New total number of shares

1:4 issue (current price = £1) = 4*1/5

2

TNPP

Theoretical nil paid price
Max price someone would pay for the right

TERP-Subscription price=TNPP

3

Warrant premium

The amount extra it costs to buy the warrant over the shares, i.e. the time value of the warrant
WP=(Exercise Price+Price of Warrant)-Share price.

4

Warrant - Gearing Ratio

=(Warrant premium/Exercise Price)*100

5

Number of Contracts required to hedge

=(Portfolio value*Beta)/Futures Value

6

Fair Value of Future

=Spot price - net benefit of carry

7

Balance Sheet Calculation

Assets = Liabilities + Equity (Share capital + Share premium + Retained Eanings)

8

Warrants: Intrinsic value

Share price - exercise price

9

Warrants: Time value

Warrant market price - intrinsic value

10

Warrants: Gearing Ratio

(Share price/ Warrants market price)*100

11

Hedging calculation

(Present Value * Beta)/(Future price * Tick Value)

12

Gilt Hedging calculation

(Portfolio Value*(portfolio duration/futures duration))/Futures value