高级公司金融Options and Corporate Finance推荐.ppt

Should we value the convertible bond using Black-Scholes formula? The strike price is time varying. The default and dilution are also not reflected in this figure. The Difference Between Warrants and Call Options Call options are issued by individual investors or institutions, while warrants are issued by the firms. When a warrant is exercised, a firm must issue new shares of stock. But when the options are exercised there is no change in the total number of the shares. Only the ownership of the shares changes. The exercise of warrants can have the effect of diluting the claims of existing shareholders. Dilution Example Imagine that Mr. Armstrong and Mr. LeMond are shareholders in a firm whose only asset is 6 ounces of platinum. When they incorporated, each man contributed 3 ounces of platinum, then valued at $600 per ounce. They printed up two stock certificates, and named the firm LegStrong, Inc.. Suppose that Mr. Armstrong decides to sell Mr. Mercx a call option issued on Mr. Armstrong’s share. The call gives Mr. Mercx the option to buy Mr. Armstong’s share for $1,800. If the price of platinum rises above $600 per ounce, say $700 per ounce, Mr. Mercx will exercise and profit by $700*6/2-$1,800 = $300 Nothing else changes except the names of the shareholders. Dilution Example Suppose that Mr. Armstrong and Mr. LeMond meet as the board of directors of LegStrong. The board decides to sell Mr. Mercx a warrant. The warrant gives Mr. Mercx the option to buy one share for $1,800. Suppose the warrant finishes in-the-money, (platinum increased to $700 per ounce). Mr. Mercx will exercise. The firm will print up one new share. Dilution Example The balance sheet of LegStrong Inc. when Legstrong is formed and the platinum price is $600 per ounces: Balance Sheet (platinum price is $600) Assets Liability and Equity Platinum (6 ounces) $3,000 Debt 0 Equity (2 shares) $3,000 Total $3,000 Total $3,000 Dilution Example The balance sheet of LegStrong Inc. when the platinum pric