Book contents
- Short Introduction to Corporate Finance
- Cambridge Short Introductions
- Short Introduction to Corporate Finance
- Copyright page
- Contents
- Figures
- Tables
- Preface
- Acknowledgments
- 1 Who Are the Players in Corporate Finance?
- 2 NPV and the Investment Decision of the Firm
- 3 Portfolio Theory and the Discount Rate
- 4 Capital Structure Theory
- 5 Option Pricing Theory
- 6 Asymmetric Information
- 7 Market Efficiency
- 8 Wrapping It Up
- Index
5 - Option Pricing Theory
Published online by Cambridge University Press: 09 February 2017
- Short Introduction to Corporate Finance
- Cambridge Short Introductions
- Short Introduction to Corporate Finance
- Copyright page
- Contents
- Figures
- Tables
- Preface
- Acknowledgments
- 1 Who Are the Players in Corporate Finance?
- 2 NPV and the Investment Decision of the Firm
- 3 Portfolio Theory and the Discount Rate
- 4 Capital Structure Theory
- 5 Option Pricing Theory
- 6 Asymmetric Information
- 7 Market Efficiency
- 8 Wrapping It Up
- Index
Summary
Every summer in Cambridge, England, the Cambridge Shakespeare Festival puts on a series of plays in the college gardens. These are very popular with the audience, who bring their own chairs, blankets, and picnic baskets to watch Shakespeare in a gorgeous college garden. However, there is one big downside – the English weather. Buying the (non-refundable) tickets well in advance will reserve a place for you but, unfortunately, exposes you to the risk that it will pour down on the day of the performance, leaving you sitting on a sodden blanket watching a bunch of unhappy actors who would also rather be elsewhere. Not buying the tickets in advance, in contrast, exposes you to the risk that the weather will be gorgeous on the day but the show will be sold out (or that ticket prices rise too much for you to afford), leaving you on the road outside the garden, listening to the sounds of merriment and wishing you were inside.
- Type
- Chapter
- Information
- Short Introduction to Corporate Finance , pp. 98 - 125Publisher: Cambridge University PressPrint publication year: 2016