BU397 Lecture Notes - Lecture 4: Financial Instrument, Underlying, Valuation Of Options
Document Summary
X (ifrs: contingent settlement provision is based on an event outside control) (aspe: liability only if the contingency is highly likely) Shares giving holder the option to ask the firm to surrender a pro rata share of net assets upon windup. Preferred shares that must be repaid if certain conditions are met (e. g. if the market price of the shares exceed a certain threshold) Debt settled in a variable number of shares equal to the face value of the debt (or when holder has the option to require settlement in cash or a variable. Their value changes in response to the underlying instrument: 2. ) they require little or no initial investment, 3. ) They are settled at a future date: embedded derivatives a call or put option that is contained in (embedded in) a financial instrument such as a debenture. Managing risks: three categories of costs, 1. )
