Creation and Valuation of Instruments Compensating Lower Share Prices with the Help of Black-Scholes Formula

• Autorzy: Leszek Zaremba
• Języki publikacji: EN

Abstrakty

EN

In this paper, we present a 1-period model of the Polish financial market from the view point of KGHM, the Polish largest listed company that suffered huge declines in share prices from 125 PLN in August 2015 to 60 PLN in January 2015. Our goal is to show how KGHM might create a portfolio (with practically zero cost), which would fully compensate the abovementioned declines. The methodology presented below may be equally well employed by many other listed companies and investment funds, as well. We create here a matrix model of the Polish financial market and employ the Black-Scholes formula to valuate portfolios compensating potential declines of KGHM's shares prices. To give more insight to practitioners wishing to apply the results presented here to other listed companies, we distinguish two cases. In one of them, volatility of KGHM's share prices is 20%, and in the other case it equals 33%. (original abstract)

Słowa kluczowe

EN

Shares prices; Black-Scholes model; Compensation fee system; Financial instruments valuation

PL

Ceny akcji; Model Blacka-Scholesa; System opłat kompensacyjnych (SOK); Wycena instrumentów finansowych

• Czasopismo: Foundations of Management
• Rocznik: 2017
• Tom: 9
• Numer: nr 1
• Strony: 25--32

Twórcy

autor

Leszek Zaremba

• Vistula University, Warsaw, Poland

Bibliografia

• Cerny, A., 2009. Mathematical Techniques in Finance. Princeton University Press.
• Zaremba, L., 2015. Inżynieria finansowa na rynkach zupełnych (Financial Engineering in the Complete Markets). Kwartalnik Naukowy Uniwersytetu Vistula (Vistula Scientific Quarterly), Vol. 46, No. 4, pp.101-115.

Identyfikatory

DOI

10.1515/fman-2017-0002