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Douglas Carroll
In this course, we’ll look at the elemental features of basic call and put options and identify the factors which are the key determinants of option values.
We’ll also look at the characteristics and methodology used to estimate option values: Black-Scholes and binomial option pricing models.
In this course, we’ll also define the term “real option” and draw decision trees to represent alternative decisions and potential outcomes in an uncertain economy and describe three types of real options—timing, growth, and abandonment—and explain why it is important to consider those options when evaluating projects.
We’ll explain how an investment for which a negative NPV is projected can have a positive NPV once any embedded real options are properly included in the evaluation as well as describe other methodologies businesses sometimes use to decide among investment projects: Equivalent Annual Benefit, Profitability Index and Hurdle Rate.
We’ll wrap up the course with a look at the option equivalents of corporate securities and explain how any insights obtained can be used in determining optimal investing or issuance strategies.
Read more
In this course, we’ll look at the elemental features of basic call and put options and identify the factors which are the key determinants of option values.
We’ll also look at the characteristics and methodology used to estimate option values: Black-Scholes and binomial option pricing models.
In this course, we’ll also define the term “real option” and draw decision trees to represent alternative decisions and potential outcomes in an uncertain economy and describe three types of real options—timing, growth, and abandonment—and explain why it is important to consider those options when evaluating projects.
We’ll explain how an investment for which a negative NPV is projected can have a positive NPV once any embedded real options are properly included in the evaluation as well as describe other methodologies businesses sometimes use to decide among investment projects: Equivalent Annual Benefit, Profitability Index and Hurdle Rate.
We’ll wrap up the course with a look at the option equivalents of corporate securities and explain how any insights obtained can be used in determining optimal investing or issuance strategies.
Read more
In this course, we’ll look at the elemental features of basic call and put options and identify the factors which are the key determinants of option values.
We’ll also look at the characteristics and methodology used to estimate option values: Black-Scholes and binomial option pricing models.
In this course, we’ll also define the term “real option” and draw decision trees to represent alternative decisions and potential outcomes in an uncertain economy and describe three types of real options—timing, growth, and abandonment—and explain why it is important to consider those options when evaluating projects.
We’ll explain how an investment for which a negative NPV is projected can have a positive NPV once any embedded real options are properly included in the evaluation as well as describe other methodologies businesses sometimes use to decide among investment projects: Equivalent Annual Benefit, Profitability Index and Hurdle Rate.
We’ll wrap up the course with a look at the option equivalents of corporate securities and explain how any insights obtained can be used in determining optimal investing or issuance strategies.
This course is part 4 of the New York Institute of Finance’s Corporate Finance & Valuation Methods Professional Certificate.
Register for this course and see more details by visiting:
OpenCourser.com/course/e8aw8r/option
What's inside
Learning objectives
- Introduction to option contracts and option pricing
- Real options
- Integrating real options with net present value analysis
- Real options applied to capital budgeting decisions
- Option-based deconstruction of corporate securities
- Introduction to option contracts and option pricing
- Real options
- Integrating real options with net present value analysis
- Real options applied to capital budgeting decisions
- Option-based deconstruction of corporate securities
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what should give you pause and
possible dealbreakers
Prepares students for a career in finance or related areas
Fits well as a part of a finance career pathway
Quantitative element will be manageable for students with a grasp of math and statistics
Can be utilized for a deeper understanding of financial careers
Concepts are grounded in industry practice
Can be paired with other courses for a more in-depth learning experience
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Reviews summary
Mastering option pricing and capital budgeting
According to learners, this course offers a strong theoretical foundation in option pricing models, particularly Black-Scholes and binomial models. Students appreciate its emphasis on real options, finding the content highly relevant for capital budgeting and corporate finance. While providing practical applications for complex financial decisions, some learners noted the demanding nature of the material, suggesting a prerequisite of solid financial and quantitative understanding.
Concepts are well-explained by the instructors.
"The instructor explained complex topics in an understandable way, breaking them down effectively."
"I found the lectures well-structured and easy to follow, making difficult material more accessible."
"The course content was delivered very clearly, which is crucial for such a technical subject."
Effectively combines option theory with traditional capital budgeting tools.
"I really appreciated how real options were integrated seamlessly into traditional NPV analysis."
"It showed me how to enhance traditional project evaluation using modern option theory."
"The link between advanced options and practical corporate finance applications was exceptionally clear."
Provides a solid grounding in option pricing models and real options.
"The course thoroughly covers Black-Scholes and binomial models, building a robust foundation."
"I gained a comprehensive understanding of various real option types and their valuation methodologies."
"It offers exceptionally clear explanations of fundamental option theory, which was very helpful."
Directly applicable to corporate finance and valuation roles.
"I found the concepts directly applicable to my work in financial analysis and strategic planning."
"It bridges the gap between theoretical models and real-world capital budgeting decisions."
"Helped me understand how to evaluate complex investment projects more accurately in my job."
Requires a solid background in finance and quantitative methods.
"This course is quite challenging if you don't have a strong finance background or prior math skills."
"Some sections felt very advanced and definitely required my prior understanding of calculus or statistics."
"I found the pace intense, especially for the real options section; it assumes a high level of engagement."
Activities
Be better prepared
before
your course. Deepen your understanding
during
and
after
it. Supplement your coursework and achieve mastery of the topics covered
in Option Pricing and Applications in Capital Budgeting and Corporate Finance with these
activities:
Review basic financial concepts
Show steps
Solidify your grasp of essential financial concepts for a stronger foundation in this course.
Browse courses on
Financial Concepts
Show steps
-
Review textbooks or online resources on basic finance
-
Participate in online forums or discussion groups related to finance
-
Attend a workshop or webinar on financial fundamentals
Explore option pricing models
Show steps
Expand your understanding of option pricing by following guided tutorials and practicing with real-world examples.
Browse courses on
Black-Scholes Model
Show steps
-
Identify and select reputable online tutorials on option pricing models
-
Follow the tutorials step-by-step, taking notes and practicing the techniques
-
Apply the models to real-world option pricing scenarios
Discuss option-based deconstruction of corporate securities
Show steps
Gain insights by engaging in peer discussions and sharing perspectives on how options can be used to analyze and understand corporate securities.
Show steps
-
Form or join a study group or online discussion forum
-
Prepare by reading assigned materials and researching relevant concepts
-
Actively participate in discussions, sharing insights and asking questions
Five other activities
Expand to see all activities and additional details
Show all eight activities
Attend a workshop on advanced option strategies
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Gain specialized knowledge and insights by attending a workshop that covers advanced option strategies and techniques.
Browse courses on
Options Trading
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-
Research and identify workshops on advanced option strategies
-
Register and attend the workshop
-
Actively participate in the workshop, taking notes and asking questions
Explore open-source financial modeling tools
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Enhance your practical skills by experimenting with open-source financial modeling tools to gain hands-on experience.
Browse courses on
Open Source
Show steps
-
Identify and select reputable open-source financial modeling tools
-
Install and familiarize yourself with the tools
-
Build and analyze financial models using the tools
Develop a real options decision tree
Show steps
Enhance your understanding of real options by creating a decision tree to represent alternative decisions and potential outcomes in an uncertain economy.
Browse courses on
Real Options
Show steps
-
Identify a hypothetical project or investment opportunity
-
Brainstorm and list all potential decisions and outcomes related to the project
-
Construct a decision tree that maps out the possible paths and their associated probabilities
-
Analyze the decision tree to identify the optimal decision based on the expected value
Develop a financial model incorporating real options
Show steps
Apply your understanding of real options by building a financial model that incorporates real options into the valuation process.
Browse courses on
Financial Modeling
Show steps
-
Identify a suitable project or investment opportunity
-
Gather relevant data and information
-
Construct a financial model that incorporates real options
-
Analyze the model and evaluate the impact of real options on the project's value
-
Present the findings and recommendations
Compile and review course materials
Show steps
Reinforce your understanding by organizing, expanding on, and reviewing notes, assignments, quizzes, and exams.
Browse courses on
Review
Show steps
-
Gather all course materials, including notes, slides, assignments, and assessments
-
Review and summarize key concepts and formulas
-
Identify areas where further understanding is needed and seek additional resources
Review basic financial concepts
Show steps
Solidify your grasp of essential financial concepts for a stronger foundation in this course.
Browse courses on
Financial Concepts
Show steps
Show steps
Show steps
- Review textbooks or online resources on basic finance
- Participate in online forums or discussion groups related to finance
- Attend a workshop or webinar on financial fundamentals
Explore option pricing models
Show steps
Expand your understanding of option pricing by following guided tutorials and practicing with real-world examples.
Browse courses on
Black-Scholes Model
Show steps
Show steps
Show steps
- Identify and select reputable online tutorials on option pricing models
- Follow the tutorials step-by-step, taking notes and practicing the techniques
- Apply the models to real-world option pricing scenarios
Discuss option-based deconstruction of corporate securities
Show steps
Gain insights by engaging in peer discussions and sharing perspectives on how options can be used to analyze and understand corporate securities.
Show steps
Show steps
Show steps
- Form or join a study group or online discussion forum
- Prepare by reading assigned materials and researching relevant concepts
- Actively participate in discussions, sharing insights and asking questions
Five other activities
Expand to see all activities and additional details
Show all eight activities
Attend a workshop on advanced option strategies
Show steps
Gain specialized knowledge and insights by attending a workshop that covers advanced option strategies and techniques.
Browse courses on
Options Trading
Show steps
Show steps
Show steps
- Research and identify workshops on advanced option strategies
- Register and attend the workshop
- Actively participate in the workshop, taking notes and asking questions
Explore open-source financial modeling tools
Show steps
Enhance your practical skills by experimenting with open-source financial modeling tools to gain hands-on experience.
Browse courses on
Open Source
Show steps
Show steps
Show steps
- Identify and select reputable open-source financial modeling tools
- Install and familiarize yourself with the tools
- Build and analyze financial models using the tools
Develop a real options decision tree
Show steps
Enhance your understanding of real options by creating a decision tree to represent alternative decisions and potential outcomes in an uncertain economy.
Browse courses on
Real Options
Show steps
Show steps
Show steps
- Identify a hypothetical project or investment opportunity
- Brainstorm and list all potential decisions and outcomes related to the project
- Construct a decision tree that maps out the possible paths and their associated probabilities
- Analyze the decision tree to identify the optimal decision based on the expected value
Develop a financial model incorporating real options
Show steps
Apply your understanding of real options by building a financial model that incorporates real options into the valuation process.
Browse courses on
Financial Modeling
Show steps
Show steps
Show steps
- Identify a suitable project or investment opportunity
- Gather relevant data and information
- Construct a financial model that incorporates real options
- Analyze the model and evaluate the impact of real options on the project's value
- Present the findings and recommendations
Compile and review course materials
Show steps
Reinforce your understanding by organizing, expanding on, and reviewing notes, assignments, quizzes, and exams.
Browse courses on
Review
Show steps
Show steps
Show steps
- Gather all course materials, including notes, slides, assignments, and assessments
- Review and summarize key concepts and formulas
- Identify areas where further understanding is needed and seek additional resources
Career center
Learners who complete Option Pricing and Applications in Capital Budgeting and Corporate Finance will develop knowledge and skills
that may be useful to these careers:
Financial Analyst
Financial Analyst
Financial Analysts help clients make informed investment decisions. This course can be very helpful to both entry-level analysts who are getting into the field as well as those who want to learn more about investment options. Graduates may find themselves valuing real investment options, executing trading strategies, and making recommendations for equity markets.
Investment Banker
Investment Banker
Investment Bankers provide their clients with a range of financial services which may include underwriting new investment opportunities. To be successful, investment bankers need to have a strong understanding of how to value options and may wish to take this course to enhance their knowledge in this area.
Portfolio Manager
Portfolio Manager
Portfolio Managers oversee investment portfolios, making decisions about what to buy and sell. They study market trends, company fundamentals, and other factors to make informed decisions. This course may be particularly helpful to those wishing to manage portfolios that have an emphasis on option strategies.
Risk Manager
Risk Manager
Risk Managers are tasked with protecting their companies from financial losses. They analyze risks and make recommendations for how to reduce them. To be successful, Risk Managers need to have a strong understanding of how to value options and may wish to take this course to enhance their knowledge in this area.
Equity Research Analyst
Equity Research Analyst
Equity Research Analysts provide detailed reports on companies, their earnings, and growth potential. To be successful, Equity Research Analysts need to have a strong understanding of how to value options and may wish to take this course to enhance their knowledge in this area.
Trader
Trader
Traders buy and sell stocks, bonds, and other financial instruments for their clients or for their own account. To be successful, Traders need to have a strong understanding of how to value options and may wish to take this course to enhance their knowledge in this area.
Corporate Finance Analyst
Corporate Finance Analyst
Corporate Finance Analysts provide financial advice to their clients. This can include advising on capital budgeting, mergers and acquisitions, and other financial matters. To be successful, Corporate Finance Analysts need to have a strong understanding of how to value options and may wish to take this course to enhance their knowledge in this area.
Financial Planner
Financial Planner
Financial Planners help individuals and families make informed financial decisions. This can include advising on investments, retirement planning, and other financial matters. To be successful, Financial Planners need to have a strong understanding of how to value options and may wish to take this course to enhance their knowledge in this area.
Quantitative Analyst
Quantitative Analyst
Quantitative Analysts use mathematical and statistical models to analyze financial data, such as correlations and risks, in order to help make informed investment decisions. To be successful, Quantitative Analysts may wish to take this course to help build a foundation in option pricing and valuation and gain an understanding of advanced option modeling techniques.
Data Scientist
Data Scientist
Data Scientists use statistical and mathematical modeling to derive insights from data. This course may be helpful to those wishing to analyze financial data, as it helps build a foundation in option pricing and valuation and provides an understanding of advanced option modeling techniques.
Software Engineer
Software Engineer
Software Engineers design, develop, and maintain computer systems and applications. This course may be helpful to those wishing to develop trading or financial software, as it provides a foundation in option pricing and valuation and an understanding of advanced option modeling techniques.
Actuary
Actuary
Actuaries use statistical and mathematical models to assess risk and uncertainty in the insurance industry. This course may be helpful to those wishing to specialize in the pricing of insurance products, as it provides a foundation in option pricing and valuation and an understanding of advanced option modeling techniques.
Economist
Economist
Economists study the production, distribution, and consumption of goods and services. This course may be helpful to those wishing to specialize in financial economics or econometrics, as it provides a foundation in option pricing and valuation and an understanding of advanced option modeling techniques.
Statistician
Statistician
Statisticians collect, analyze, interpret, and present data. This course may be helpful to those wishing to specialize in financial statistics or econometrics, as it provides a foundation in option pricing and valuation and an understanding of advanced option modeling techniques.
Financial Consultant
Financial Consultant
Financial Consultants provide advice to individuals and businesses on financial matters. This course may be helpful to those wishing to provide advice on investment or corporate finance, as it provides a foundation in option pricing and valuation and an understanding of advanced option modeling techniques.
For more career information including salaries, visit:
OpenCourser.com/course/e8aw8r/option
Reading list
We've selected 11 books
that we think will supplement your
learning. Use these to
develop background knowledge, enrich your coursework, and gain a
deeper understanding of the topics covered in
Option Pricing and Applications in Capital Budgeting and Corporate Finance.
This textbook provides a comprehensive overview of options, futures, and derivatives, making it a valuable resource for students and practitioners in the field. It covers the fundamental concepts of option pricing, hedging, and trading strategies, and provides insights into the practical applications of these instruments in the financial markets.
Save
Provides a comprehensive overview of valuation methods, covering topics such as discounted cash flow analysis, comparable company analysis, and precedent transactions. It valuable resource for students and practitioners in the field of corporate finance.
Provides a comprehensive overview of option pricing and volatility, covering topics such as the Black-Scholes model, implied volatility, and stochastic volatility models. It valuable resource for students and practitioners in the field of options pricing.
Provides a comprehensive overview of financial risk management, covering topics such as risk measurement, risk management techniques, and risk modeling. It valuable resource for students and practitioners in the field of financial risk management.
Provides a comprehensive overview of real options and investment under uncertainty, covering topics such as the theory of real options, applications of real options in capital budgeting, and risk management. It valuable resource for students and practitioners in the field of real options.
Provides a comprehensive overview of advanced corporate finance topics, such as mergers and acquisitions, private equity, and venture capital. It valuable resource for students and practitioners in the field of corporate finance.
Provides a comprehensive overview of corporate finance theory and practice, covering topics such as capital budgeting, capital structure, and dividend policy. It valuable resource for students and practitioners in the field of corporate finance.
Provides a comprehensive overview of options and futures, covering topics such as the pricing of options and futures, and the use of these instruments in hedging and speculation. It valuable resource for students and practitioners in the field of derivatives.
Save
Provides a comprehensive overview of financial management, covering topics such as capital budgeting, capital structure, and dividend policy. It valuable resource for students and practitioners in the field of financial management.
Save
Provides a comprehensive overview of corporate finance, covering topics such as capital budgeting, capital structure, and dividend policy. It valuable resource for students and practitioners in the field of corporate finance.
Provides a comprehensive overview of corporate finance, covering topics such as capital budgeting, capital structure, and dividend policy. It valuable resource for students and practitioners in the field of corporate finance.
For more information about how these books relate to this course, visit:
OpenCourser.com/course/e8aw8r/option
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Effort
1 to 2 hours per week for 4 weeks
Level
Introductory
Via
edX
Institution
New York Institute of Finance
Instructor
Douglas Carroll
Language
English
Transcript
English
This course belongs to a
collection
called
Corporate Finance and Valuation Methods. It's comprised of six courses:
- Discounted Cash Flow (DCF) and Other Valuation Methodologies
- Option Pricing and Applications in Capital Budgeting and Corporate Finance (viewing)
- Corporate Funding Alternatives and Financing Strategies
- Corporate Finance and Valuation Methods Professional Certificate Examination
- Fundamentals of Financial Mathematics and Capital Budgeting
- Cost of Capital
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