Strengths And Weaknesses Of The Black Scholes Model

Models provide the physical testing and proof of a hypothesis by exploring the extent to which the two factors relate within the given hypothesis. It puts a theory into action, to see if the theory is corrected causes and effects.

Models provide the physical testing and proof of a hypothesis by exploring the extent to which the two factors relate within the given hypothesis. It puts a theory into action, to see if the theory is correct.

Valuation is the estimation of an asset’s value, whether real or financial, based on variables perceived to be related to future investment returns, on comparison with similar assets, or, when relevant, on estimates of immediate liquidation proceeds (Pinto, Henry, Robinson, Stowe; 2010). Correct valuation of real assets can present challenges to financial analysts. Different models can be used to arrive at the closest estimate of value and yet certain issues will always arise. This case attempts to tackle two approaches in real asset valuation: Discounted Cash Flow (DCF) analysis and the issues surrounding such, as well as the Black-Scholes Model for Real Options. Questions to be addressed in the study are:

It is believed that Efficient Market Theory is based upon some fallacies and it does not provide strong grounds of whatever that it proposes. More importantly the Efficient Market theory is perceived to be too subjective in its definition and details and because of this it is close to impossible to accommodate this theory into a meaningful and explicit financial model that can actually assist investors in making the investment decisions (Andresso-O’Callaghan, B., 2007).

Week 1 – Introduction – Financial Accounting (Review) Week 2 – Financial Markets and Net Present Value Week 3 – Present Value Concepts Week 4 – Bond Valuation and Term Structure Theory Week 5 – Valuation of Stocks Week 6 – Risk and Return – Problem Set #1 Due Week 7* – Midterm (Tuesday*) Week 8 - Portfolio Theory Week 9 – Capital Asset Pricing Model Week 10 – Arbitrage Pricing Theory Week 11 – Operation and Efficiency of Capital Markets Week 12 – Course Review – Problem Set #2 Due

The three pillars are environmental, social and economically sustainability. However in this report, environmental sustainability will be brought to light, the two other pillars will be trivial. In order for environmental sustainability to be defined, general sustainability must be defined. Sustainability is the ability to continue a defined behaviour indefinitely (Thwink.org, 2015). For the environment, there are three aspects which must be sustained for, renewable resources, non-renewable resources and pollution. Therefore, environmental sustainability is the degree of pollution emission, renewable resource production and non-renewable resource consumption that can be continued indefinitely for future use. CAROBN

This case attempts to tackle two approaches in real asset valuation: Discounted Cash Flow (DCF) analysis and the issues surrounding such, as well as the Black-Scholes

This document describes the coursework component for BMAN23000 which counts for 20% of the final mark for the course. You are required to complete this coursework in groups. You will be randomly allocated to a coursework group of approximately 6 fellow students in the same workshop. Details of coursework groups and companies allocated to each coursework group will be available on Blackboard (in a file called Group and Company Allocation). Details of the assignment are given below. The assignment will be discussed in detail in Workshop 1 in Week 4.

➢ Be prepared to defend your specific assumptions about the various inputs adopted into equations. For example, the team is expected to suggest the proposed market risk premium.

Firstly, there are some simplifications to be done to get all the necessary inputs for the Black & Scholes model. One approximation to be made is the estimation of the

This document is authorized for use only by Yen Ting Chen in FInancial Markets and Institutions taught by Nawal Ahmed Boston University from September 2014 to December 2014.

As mentioned earlier, the theory uses a forward-looking risk premium which reflects current market conditions that are sensitive to changes. Although this is the case, research on various companies demonstrates that experts infer future

The Black Scholes Merton (BSM) model is the best-known model for valuing options as it is the original of many option pricing models today (Haug and Taleb, 2009; Le, 2015). Developed in 1973 by Fisher Black, Myron Scholes and Robert Merton, the BSM model is still widely used today as the benchmark for many models and techniques that financial analysts use to analyse and determine the fair prices of given options (Jumarie, 2010). It is widely used due to its simplicity however there are many criticisms regarding the assumptions made by the model (Bharath and Sumway, 2008; Haug and Taleb, 2009; Le, 2015)

For both financing alternative, develop a model that shows forecasted revenues, expenses, profits, and free cash flows generated by Harmonic in years one through seven.

In order to work towards this goal, I knew I had to upgrade my knowledge and skills. This was when I first felt the need to enroll in a master’s program in Financial Engineering. Upon exploration, I realized that the multi-disciplinary approach of financial engineering made it an ideal match for my career aspirations, as it involves a combination of engineering, mathematics and finance, all of which I am deeply interested in and have the sufficient background to excel. Finally, having realized the fast-paced changing environment of finance and trading brought about by financial engineering, I have decided to enroll in a financial engineering program to gain graduate-level knowledge in quantitative finance and get updated of the latest advances in the financial Industry. Enrolling in such a program would improve my knowledge, skill set and help me become a better equipped Quantitative trader, which I wish to become in the