Category Archives: HYBRID FINANCING INSTRUMENTS

Calls and Puts

Calls and Puts A call option is an option to purchase a specified number of shares on before a specified future date at stated strike price. The striking price is the price at which the holder of the option can buy the shares at any time prior to the expiration date of the option. It is set at near the prevailing market price of the shares at the time the option is issued. A put option is an option to sell a g

OPTIONS

OPTIONS Option is a derivative security and derives its value from an underlying security asset. An option an instrument that provides to its holders an opportunity to purchase sell a specified security at a stated price on before a specified expiration date. The focus in options is on options ed to shares. They are traded in India on the NSE and the BSE as securities. There are three forms of options: (i) rig

Market Value of Warrant (MVW)

Market Value of Warrant (MVW) The MVW is generally more than the TVW. The two values are only when (i) the TVW is very high or (ii) the warrant is near its expiration date. The maximum excess of MVW over the TVW generally is when the market pnce of shares is close to the exercise price of the warrant per share. The amount of time until expiration also effects the MVW warrant is to its expiration more likely t

Value of Warrants

Value of Warrants Like convertible bonds, a warrant has a (i) market value and (ii) and a theoretical value. The difference between them is known as the warrant premium. Theoretical Value of Warrant (TVW) The theoretical value of a warrant is the amount for which the warrant can be expected to be sold in the market. Symbolically, theoretical value of a warrant (TVW). Finance-Assignments.comInstructions Fe

Implied Price of an Attached Warrant

Implied Price of an Attached Warrant The implied price or a warrant is the price effectively paid for each warrant attached to a bond. It can he computed using Equation 20A. Implied price of all warrants = Price of bond with warrants attached Finance-Assignments.comInstructions Feel free to send us an inquiry, we reply back real quick. Or directly email us at order@finance-assignments.comName *Email *Requi

Types

Types Warrants can be (i) detachable, and (ii) non-detachable. A detachable warrant can be sold separately in the sense that the holder can continue to retain the instrument to which the warrant was tied and at the same time sell it to take advantage of price increases. Separate sale independent of the instrument is not possible in case of non-detachable warrants. The detachable warrants are listed independentl

Exercise Price

Exercise Price It is the price at which the holder of a warrant is entitled to acquire the ordinary shares of the firm. Generally, it is set higher than the market price of the shares at the time of the issue. Exercise Ratio It reflects the numbers of shares that can be acquired per warrant. Typically, the ratio is 1:1 which implies that one equity share can be purchased for each warrant. Exercise Date It means th

Difference with Convertible Debentures

Difference with Convertible Debentures Warrants are akin to convertible debentures to the extent that both give the holder the opinion rights in the ordinary shares but there are difference between the two. While the debentures and options inseparable, a warrant can be detached. Similarly, conversion option is tied debentures but warrants can be offered independently also. Warrant are typically exercisable for ca

WARRANTS

WARRANTS A warrant entitles its holders to subscribe to the equity capital of a company during a specified period at a stated particular certain price. The holder acquires only the right (option) but he has obligations to acquire the equity shares. Warrants are generally issued in conjunction with/tied other instruments, for example, attached to (i) secured premium notes of TISCO in 1992 (ii) determinate of

Evaluation

Evaluation With the invariably lower initial interest burden a growing expanding firm would be in a better position to service the debt, debentures. Subsequently, when it will do well, it can afford the servicing of the financing instrument after conversion. Secondly, they generate financial synergy. The assessment of risk characteristic, of a new firm is costly and difficult. Provide again of risk assessment. They