MATCHING: debt-to-value ratio	DO AS MANY AS leveraged recapitalization	YOU WISH American options	unlevered equity
Levered equity	at-the-money	call option	hedging
European options	capital structure	financial option	conservation of value principle
intrinsic value	open interest	option premium	portfolio insurance
put-call parity	put option	strike price

1. The relative proportions of debt, equity, and other securitiesthat a firm has outstanding. When corporations raise funds fromoutside investors, they must choose which type of security toissue. The most common choices are financing through equity aloneand financing through a combination of debt and equity.
2. With perfect capital markets, financial transactions neitheradd nor destroy value, but instead represent a repackaging of risk(and therefore return). It implies that any financial transactionthat appears to be a good deal in terms of adding value either istoo good to be true or is exploiting some type of marketimperfection

3. A measure of the firm’s leverage. This is the fraction of thefirm’s total value that does not correspond to equity. If onlyequity is used the WACC is equal to the unlevered equity cost ofcapital

4. When a firm repurchases a significant percentage of itsoutstanding shares by borrowing finds.

5. Equity in a firm with no debt.

6. Equity in a firm that also has debt outstanding.

7. The most common kind, allow their holders to exercise theoption on any date up to and including a final expiration date

8. When the exercise price of an option is equal to the currentprice of the stock

9. Gives the owner the right to buy the asset

10. Allow their holders to exercise the option only on theexpiration date

11. Gives its owner the right (but not the obligation) to purchaseor sell an asset at a fixed price at some future date

12. Using an option to reduce risk

13. The value an option would have if it expired immediately

14. The total number of outstanding contracts of that option

15. This upfront payment compensates the seller for the risk ofloss in the event that the option holder chooses to exercise theoption.

16. Using put options on the portfolio of stocks as a whole ratherthan just a single stock.

17. This relationship between the value of the stock, the bond, andcall and put options

18. Gives the owner the right to sell the asset.
19. The price at which the holder buys or sells the share of stockwhen the option is exercised