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John Moffat.
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mansoor
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Good evening sir
when we talk about valuing equity using bsop….
its saying that in effect, value of shares can be seen as a call option.
my question: is he talking about shareholders owning call options? call option is the right to buy …. but they ALREADY own the shares….
can u pls explain
i dont quite get the understanding..even tho the math is ok.
John Moffat
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Yes, but the market value of the shares is what other people are prepared to pay for them.
Buying them is like a call option because you get the benefit of the company doing well, but there is a limit on what you stand to lose if the company fails.
mansoor
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