From the category archives:

Options

Hedge Accounting for equity options – free online course

by R. Venkata Subramani

Dear Professional members,

Hedge Accounting for Equity Options – a free online course is now available at Free Online Courses on Accounting

Hedge Accounting for equity options iscovered by Accounting Standards (AS 30 in India and IAS 39 under IFRS).

This course explains the following concepts.

Topic 1: Accounting Standards for Hedge Accounting

Lesson1 – Derivative Instruments & Hedging

Lesson2 – Differences between US GAAP & IFRS

Lesson3 – Salient Features of Hedge Accounting Standards

Completion certificate for Topic 1 – Accounting Standards for Hedge Accounting

Topic 2: Features of Accounting Standards relatingto Options

Lesson 4 – Options as Hedge

Lesson5 – When is hedge accounting permissible for Options?

Completion certificate for Topic 2 – Accounting Standards relating to Options

Topic 3: ETOs – Long Put as Hedging

Lesson6 – Trade life cycle of Option Contract

Completion certificate for Topic 3 – Trade Life Cycle of Equity Options

Topic 4: Illustration of Hedge Accounting forOptions

Lesson 7 – Put Options as Hedge

Summary of Hedge Accounting for Equity Options – Recapitulate Lesson

Assignment- Submit the answer in Excel or Word Document

Completion certificate for Topic 4 – Hedge Accounting for Options

Get your Merit Certificate for the entire Course

Completion certificate for the entire Course

Please feel free to take the course at http://courses.accountingforinvestments.com/

R. Venkata Subramani

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Sub-prime credit cards

by R. Venkata Subramani

Credit card companies in the United States offered sub-prime credit cards usually with lower credit limits and charged high fees and interest rates sometimes as high as 30% or more. With slowdown in economic growth in the United States in 2002, the default rates for sub-prime credit card holders increased, compelling sub-prime credit card issuers to reduce or cease operations.

In 2007, many new vendors emerged making the market more competitive, forcing issuers to make the cards more attractive to consumers which resulted in the interest rates being available as low as 9.9% but even then in some cases it goes as high as 24%.

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Definition of Options and origin of options

An option is the right, but not the obligation, to buy or sell something at a predetermined price at anytime within a specified time period. Origin of Options: Chicago Board of Options Exchange (CBOE) was created in 1973 and CBOE standardized the option contracts, improving the liquidity and enabling the general public to participate in [...]

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Binomial Model of option pricing

by R. Venkata Subramani

Binomial option pricing model is an options valuation method developed by Cox, et al, in 1979. The binomial option pricing model uses an iterative procedure, allowing for the specification of nodes, or points in time, during the time span between the valuation date and the option’s expiration date. Like the Black-Scholes model, this model also [...]

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Black Scholes Model of option pricing

by R. Venkata Subramani

The Black-Scholes model is used to calculate a theoretical call price, ignoring dividends paid during the life of the option, using the five key determinants of an option’s price viz., stock price, strike price, volatility, time to expiration, and short-term risk free interest rate. The original formula for calculating the theoretical option price is as [...]

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Pricing of Option

by R. Venkata Subramani

Option pricing is based on some key parameters as discussed before in this chapter. To recapitulate essentially the following factors play a key role in determining the theoretical value of an option: Underlying price of the stock Strike price of the option contract Time to maturity Interest Rate Anticipated volatility of the underlying Dividends – [...]

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Greeks in Option pricing

by R. Venkata Subramani

Option pricing is based on some key parameters as discussed before in this chapter. Essentially the following factors, known as ‘Greeks’ should be grasped to understand the option pricing: Delta Gamma Theta Vega Rho Omega These factors are discussed below in detail. Delta Delta is a measure that reflects the relationship between a change in [...]

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Volatility & pricing of options

by R. Venkata Subramani

Volatility forms a very key factor in the pricing of an option. As we discuss later in this chapter this component known as ‘vega’ is a factor that is used in the mathematical computation of arriving at the theoretical value of an option price. Increased volatility means higher option prices and vice versa.

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Historical Volatility & Implied Volatility in Options

by R. Venkata Subramani

Volatility is a measure of how fast the underlying futures prices are moving. It is a measure of the speed and magnitude at which the underlying stock’s prices change. This is expressed in a percentage. The two basic types of volatility are historical volatility and implied volatility. Historical volatility is a measure of how much [...]

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Factors affecting pricing of an Option

by R. Venkata Subramani

The current price of the underlying is obviously a very important factor that determines the price of an Option. Also the strike price of the contract is another key factor that affects the price of an Option. The time to expiry is again another important factor that affects the price of an Option. The intrinsic [...]

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