# Finanzas Corporativas — Avanzado (C1/C2) 2: Derivatives, Portfolio Theory, Fixed Income Analytics & M&A > [Español] Finanzas Corporativas: Option pricing mechanics, Greeks, Black-Scholes, Modern Portfolio Theory, duration/convexity analytics, and M&A transaction dynamics - **Canonical URL:** https://flashcards.world/flashcards/sets/19d967ab-6f8e-4671-a1b9-ce442c4b3761/ - **Markdown URL:** https://flashcards.world/flashcards/sets/19d967ab-6f8e-4671-a1b9-ce442c4b3761.md - **Level:** advanced - **Languages:** es → es - **Total Cards:** 32 ## Flashcards (32 Cards) | # | Front (Term / Prompt) | Back (Definition / Answer) | Example | Multiple-Choice Options | | :--- | :--- | :--- | :--- | :--- | | 1 | What is Macaulay Duration and what is its mathematical formula? | The weighted average maturity of a bond's cash flows: MacD = [∑ (t * CF_t / (1 + y)^t)] / Bond Price, measured in years. | | | | 2 | In M&A finance, when is an all-stock acquisition immediately accretive to the acquirer's Earnings Per Share (EPS)? | When the acquiring company trades at a higher Price-to-Earnings (P/E) multiple than the target company (excluding transaction costs and post-merger integration synergies). | | | | 3 | What is Implied Volatility (IV) and how is it obtained from market option prices? | The forward-looking expected standard deviation of underlying asset returns implied by market option prices; calculated by numerically inverting the Black-Scholes formula using observed market premiums. | | | | 4 | Distinguish between the Capital Market Line (CML) and the Security Market Line (SML). | The CML evaluates efficient portfolios plotting expected return against total risk (σ); the SML applies to all individual assets and portfolios, plotting expected return against systematic risk (β) based on CAPM. | | | | 5 | What is Delta-Neutral Hedging and why does it require dynamic rebalancing? | A trading strategy creating a portfolio with net Delta = 0 to insulate against small price moves; dynamic rebalancing is required because Gamma causes Delta to change continuously as underlying price moves. | | | | 6 | What is the Volatility Smile/Smirk observed in equity index options markets? | A pattern where deep out-of-the-money puts trade at higher implied volatilities than at-the-money options, reflecting market pricing of negative skewness and tail-risk crashes. | | | | 7 | What is the Sortino Ratio and why is it preferred for asymmetric return profiles? | Sortino Ratio = (R_p - R_target) / Downside Deviation; it penalizes only harmful downside volatility below a target return rather than total standard deviation, which penalizes upside gains. | | | | 8 | Define Option Theta and explain why it represents the cost of holding long options. | Theta (Θ = -∂V/∂T) measures the rate of decay of an option's market value over time; long options suffer continuous value decay as expiration approaches (negative theta). | | | | 9 | What are the two major categories of M&A synergies? | Operating synergies (revenue enhancements through cross-selling and cost savings via economies of scale/streamlined SG&A) and Financial synergies (lower cost of capital, increased debt capacity, tax shields). | | | | 10 | What is the Markowitz Efficient Frontier in portfolio theory? | The locus of optimal portfolios in expected return versus standard deviation space that offer the highest expected return for a defined level of risk, or the lowest risk for a given target return. | | | | 11 | Define DV01 (Dollar Value of an 01 / PVBP). | The absolute dollar change in a bond's price or portfolio value resulting from a 1 basis point (0.01% or 0.0001) shift in yield: DV01 ≈ ModD * Price * 0.0001. | | | | 12 | What is the Tangency Portfolio in Modern Portfolio Theory? | The unique optimal portfolio of risky assets located at the point where the Capital Allocation Line is tangent to the Efficient Frontier, maximizing the Sharpe Ratio. | | | | 13 | What do N(d1) and N(d2) represent in the Black-Scholes-Merton option pricing framework? | N(d1) is the option Delta (the sensitivity ∂C/∂S and the replication hedge ratio); N(d2) is the risk-neutral probability that the call option finishes in-the-money at expiration (S_T > K). | | | | 14 | What are the terminal payoff formulas for long call, short call, long put, and short put options? | Long Call: max(0, S_T - K); Short Call: -max(0, S_T - K); Long Put: max(0, K - S_T); Short Put: -max(0, K - S_T). | | | | 15 | What is a Leveraged Buyout (LBO) and what creates shareholder equity returns in an LBO? | The acquisition of a company funded predominantly with substantial borrowed debt (60-80%); returns are generated via debt paydown using target company free cash flow (deleveraging), operational margin expansion, and exit multiple expansion. | | | | 16 | What is the Capital Allocation Line (CAL) and what represents its slope? | A line graph showing risk-return combinations created by mixing a risk-free asset with a portfolio of risky assets; its slope is the Sharpe Ratio of the risky portfolio. | | | | 17 | State the Sharpe Ratio formula and its interpretation. | Sharpe Ratio = (R_p - R_f) / σ_p; measures excess portfolio return earned per unit of total portfolio volatility. | | | | 18 | Define Option Gamma and explain where it achieves its maximum value. | Gamma (Γ = ∂^2V/∂S^2 = ∂Δ/∂S) measures the rate of change of Delta relative to underlying asset price; it peaks when the option is At-The-Money (ATM) close to expiration. | | | | 19 | How is a synthetic long stock position constructed using European options? | By purchasing a call option and selling a put option with identical strike price (K) and expiration date (T): S_0 ≈ C - P + K * e^(-r*T). | | | | 20 | State the Black-Scholes-Merton formula for the price of a European call option. | C = S_0 * N(d_1) - K * e^(-r*T) * N(d_2), where d_1 = [ln(S_0/K) + (r + σ^2/2)*T] / (σ * √T) and d_2 = d_1 - σ * √T. | | | | 21 | What is Modified Duration and how does it estimate bond price sensitivity to interest rate shifts? | ModD = MacD / (1 + y/m); it estimates the percentage change in bond price for a 100 bps yield change: ΔP / P ≈ -ModD * Δy. | | | | 22 | State Put-Call Parity for European options on non-dividend paying underlying stocks. | C + K * e^(-r*T) = P + S_0, where C is call price, P is put price, K is strike, S_0 is current spot price, r is risk-free rate, and T is time to maturity. | | | | 23 | State the Modern Portfolio Theory (MPT) formula for the variance of a two-asset portfolio. | σ_p^2 = w_1^2 * σ_1^2 + w_2^2 * σ_2^2 + 2 * w_1 * w_2 * Cov(R_1, R_2) = w_1^2 * σ_1^2 + w_2^2 * σ_2^2 + 2 * w_1 * w_2 * ρ_(1,2) * σ_1 * σ_2. | | | | 24 | What is a Credit Default Swap (CDS) and how does it protect the buyer? | A bilateral financial contract where the protection buyer pays a periodic spread/premium to the seller in exchange for a contingent payoff if a referenced borrower suffers a defined credit event (e.g., default, restructuring). | | | | 25 | Define Option Vega and state how implied volatility changes affect long option holders. | Vega (ν = ∂V/∂σ) measures option price sensitivity to a 1% change in implied volatility; all long calls and puts have positive Vega, gaining value when volatility expands. | | | | 26 | What are the primary differences between forward contracts and futures contracts? | Forwards are private OTC bilateral agreements with customizable terms and settlement at maturity, bearing counterparty credit risk; Futures are standardized contracts traded on public exchanges, cleared by a central clearinghouse, and marked to market daily with margin accounts. | | | | 27 | State the second-order Taylor expansion bond price change formula combining Modified Duration and Convexity. | ΔP / P ≈ -ModD * Δy + 0.5 * Convexity * (Δy)^2. | | | | 28 | State the Treynor Ratio formula and explain when it is preferable to the Sharpe Ratio. | Treynor Ratio = (R_p - R_f) / β_p; preferred when evaluating sub-portfolios or funds held within a broader, well-diversified portfolio where unsystematic risk has already been diversified away. | | | | 29 | What is a plain vanilla Interest Rate Swap and how do the counterparties exchange cash flows? | An OTC derivative agreement where one counterparty pays a fixed interest rate on a notional principal and receives a floating reference rate (e.g., SOFR), while the other party does the opposite. | | | | 30 | What is Bond Convexity, and why is positive convexity advantageous to a bondholder? | The second derivative of bond price with respect to yield (curvature of price-yield curve); positive convexity means price rises more when yields fall than it drops when yields rise by the same amount. | | | | 31 | Define Option Delta and state its theoretical values for call and put options. | Delta (Δ = ∂V/∂S) measures the change in option price per $1 change in underlying asset price; ranges from 0 to +1 for long calls and 0 to -1 for long puts. | | | | 32 | State Jensen's Alpha formula and interpret what a positive alpha signifies. | α = R_p - [R_f + β_p * (R_m - R_f)]; a positive alpha signifies that the portfolio manager generated returns exceeding the risk-adjusted benchmark predicted by CAPM. | | | --- Study this deck interactively with FSRS-6 spaced repetition, audio review, and multiple-choice mode at [Flashcards World](https://flashcards.world/flashcards/sets/19d967ab-6f8e-4671-a1b9-ce442c4b3761/).