The Pricing Game versus The Value Game : The Twitter IPO

In one of the recent post of Prof Aswath Damodaran  the authority on corporate finance in this world, valued Twitter at about $10 billion. He 813530made a ton of assumptions to get to that value and argued that changing those assumptions could give you a different value. In the last few days, he is sure that you have seen many stories about Twitter’s post-IPO worth, with numbers as high as $25 billion being offered as estimates. In fact, the gambling markets have already opened on the offering price and the players in that market seem to be siding with the higher numbers.

To describe the market the difference between Pricing Game versus The Value Game have some amazing stuff :The Pricing Game versus The Value Game   Continue reading “The Pricing Game versus The Value Game : The Twitter IPO”

Market Efficiency

Markets are said to be efficient if the market price is an unbiased estimate of the true value of the investment. It means imagesthat a market that is over pricing all assets has become inefficient. Market efficiency can go up or down from time to time. An efficient capital market has the following features:

  • Operational efficiency– low transaction cost and transaction should be quickly completed.
  • Pricing efficiency: prices should fully and fairly reflect all information.
  • Allocational efficiency: capital market through the medium of pricing efficiency allocates the funds where they are best used.

There are three different levels or forms of efficiency. Continue reading “Market Efficiency”

Swaption Straddle: Back To School

imagesHave you ever thought of purchasing or selling anything which give you both-ways profit?

I know you guys are confused what we actually are talking about but yes, in finance, there is an instrument which gives liberty to the owner to make profit irrespective of the any movement in the current market price and this magic stick is called as “STRADDLE”.

Swaption Straddle is actually a combination of the payer & receiver swaptions. It allows its owner to profit based on how much the price of the underlying security moves, regardless of the direction of price movement.  A straddle is an option trading strategy that involves buying a put and a call at the same strike price. If the underlying goes up, the call is profitable. If it goes down the put is profitable. If there’s little price movement the premiums likely constitute a loss.

Continue reading “Swaption Straddle: Back To School”