Fully explain what the following sentence in the chapter means: "Meier was able to steer a healthy portion of each issue away from hedge funds, which, in an effort to hedge their warrant exposures, might have shorted the Roche stock in the spot
market and thereby driven down share price." Assuming the warrants were long call options on Roche shares, explain how shorting Roche's
shares would have hedged the hedge funds' positions.
Hedge funds often purchase hybrid debt and then separate the bond from the warrant. If the warrants are long call options, the hedge fund can lock in a minimum profit and retain the potential for larger returns by shorting the share. As the share price rises, the gains from
the call option are offset by the losses on the shorted share. If the share price falls, profits rise continuously as a result of the short share position. To see this relationship, plot the hybrid formed by combining a long call option and a short share position. The hybrid looks like a long put.
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Which of the following statements is true?
a. A company must use the FIFO cost flow assumption for taxes as well as for financial accounting and reporting. b. A company may use FIFO for inventory valuation purposes on the balance sheet provided that LIFO cost of goods sold is reported on the income statement. c. Application of LIFO for financial reporting purposes must strictly follow IRS regulations relating to LIFO. d. LIFO is the only inventory method that must be used for financial reporting purposes if used for tax purposes.
The task of crafting a company's overall corporate strategy for a diversified company encompasses all of the following except
A. initiating actions to boost the combined performance of the corporation's collection of businesses. B. pursuing opportunities to leverage cross-business value chain relationships and strategic fit into competitive advantage. C. divesting well-performing businesses. D. picking the new industries to enter and deciding on the means of entry. E. establishing investment priorities and steering corporate resources into the most attractive business units.
Which of the following is not true about recording statutes in connection with security interests?
A) A deed of trust is valid between borrower and lender even if the deed of trust is not properly recorded. B) A mortgage that has not been properly recorded is not effective against later purchasers of a piece of property. C) A mortgage is valid between the borrower and lender even if the mortgage is not properly recorded. D) Most of the provisions for recording these interests are contained in federal statutes.
According to the case, EMONET—A Worldwide Success, one way to become prominent in a field is to recognize when there is an opportunity to
a. create positive emotional contagion b. form a new group and then take the initiative to do so c. help organizational members overcome feelings of frustration d. flatter other organizational members and boost their self-image