Black-Scholes and Binomial Models
There are different variables that usually impact the pricing options. This paper will be based on the attributes of the two widely accepted models that are used for pricing options; Black-Scholes and the Binomial Models. These two models are based on the same theoretical assumptions and foundations like risk neutral valuation and geometric price Brownian motion theory of stock price behavior.

Option pricing theory has become among the most powerful tools in commerce and finance. The famous Black-Scholes equation is an effective model that is used for option pricing. It was named after those who pioneered it; Black, Scholes and Merton who brought it up in 1973 and won a Nobel Prize economics in 19097 for discovering it. When we look at it mathematically we can say that it is a final value problem for a second order parabolic equation. In this case an option is a contract…...

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References

Chance, D. (1998). A Synthesis of Binomial Option Pricing iVIodels for Lognormaiiy

Distributed Assets.

Chung, S. & Shih, P. (2007). Generalized Cox-Ross-Rubinstein Binomial Models

Macbeth, J, & Merville, L. (1979). An empirical Examination of the Black-Scholes call option pricing model.

Black-Scholes Option Pricing Model was developed in the 1970s as a way to generate a legitimate and accurate valuation model for stock prices based on specific circumstances in the market and the stock options. It is the creation of economists Myron Scholes and Fischer Black who aimed to better forecast call options at various times within the option life cycle (PBS, 2000). According to the research, "this work involved calculating a derivative to measure how the discount rate of a warrant varies with time and stock price" (ubash, 2012). Essentially, the formula is a method for analyzing and forecasting call and put options within specific market circumstances for individual stock options. It is often used in modern investing and trading for "calculating the premium of an option" (Investopedia, 2013). Since its inception, the formula has become a powerful tool that greatly strengthens the ability of investors to forecast just the…...

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References

Investopedia. (2013). Options pricing: Black-Scholes Model. Active Trading. Web.  http://www.investopedia.com/university/options-pricing/black-scholes-model.asp 

PBS. (2000). The formula that shook the world. NOVA Online. Web.  http://www.pbs.org/wgbh/nova/stockmarket/formula.html 

Rubash, Kevin. (2012). A study of option pricing models. Bradley University. Web.  http://bradley.bradley.edu/~arr/bsm/model.html

Pricing Management
Determinants of Pricing Strategies

In pricing a new, specialized electronic product, the product development, engineering, marketing, accounting and finance teams internally will rely on internal and external factors to initially set the price. Pricing objectives and the frameworks they require will determine the internal factors included and excluded from the long-term pricing strategy overall (Avlonitis, Indounas, 2005). The intent of this analysis is to evaluate the other internal factors that will affect the pricing of a new, specialized electronic product.

Analysis of Internal Factors Affecting Pricing

ased on personal experience managing high technology products and from anecdotal interviews with members of product marketing teams in high technology businesses, the decision of whether to choose a value-based vs. cost-based approach to pricing is foundational to how many other internal factors affect price (Wagner, 1981). Value-based pricing will have a direct effect on the price elasticity of demand for a given product (Michalakelis, Dede,…...

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Bibliography

Avlonitis, G.J. & Indounas, K.A. 2005, "Pricing objectives and pricing methods in the services sector," The Journal of Services Marketing, vol. 19, no. 1, pp. 47-57.

Casey, M.P. 1985, "International Transfer Pricing," Management Accounting, vol. 67, no. 4, pp. 31.

Lucke, D., Philipp, J.H.S. & Schumacher, D. 2005, "A Note on R&D and Price Elasticity of Demand," Jahrbucher fur Nationalokonomie und Statistik, vol. 225, no. 6, pp. 688-698.

Michalakelis, C., Dede, G., Varoutas, D. & Sphicopoulos, T. 2010, "Estimating diffusion and price elasticity with application to telecommunications," Netnomics: Economic Research and Electronic Networking, vol. 11, no. 3, pp. 221-242.

Pricing Water From a Utility Perspective
Water is usually a scarce commodity but not in all situations, such as in Virginia, which is characterized by plentiful ground water supply. However, the relevant agencies in this state incur costs relating to drilling and pumping water from the ground, procurement and infrastructure costs. Because of this, pricing of water has become an important factor in water management. For utility companies in Virginia and other states, selling the water at the appropriate price is increasingly important since low costs do not cover operational costs, whereas high costs contribute to inadequate sales. The determination of the most suitable pricing model or scheme requires critical evaluation from a utility perspective and whether this commodity is affected by the same principles of economics as other goods and services or utilities.

Price Sensitivity of Water

From a utility perspective, water has seemingly weak price sensitivity as compared to other commodities…...

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References

Gaudin, Sylvestre, Ronald C. Griffin, and Robin C. Sickles (2001). Demand Specification for Municipal Water Management: Evaluation of the Stone Geary Form. Land Economics, 77(3), 399-422.

Gaudin, S. (2007, February 2). Effect of Price Information of Residential Water Demand.Applied Economics, 38(4), 383-393.

Gaudin, S. (2004, March).Transparent Prices for Municipal Water: Impact of Pricing and Billing Practices on Residential Water Use. Retrieved from Department of Economics -- Oberlin College website: https://new.oberlin.edu/dotAsset/96202.pdf

Howe, C.W. & Linaweaver, F.P. (1967).The Impact of Price on Residential Water Demand and Its Relation to System Design and Price Structure.Water Resources Research, 3(1), 13-32.

From a supply chain standpoint, pricing departments must also create a high level of communication and collaboration across a business as well. Their role is to be the orchestrators of internal effort to manage suppliers to pricing and margin levels, ensuring consistency and focus on share goals. This is one of the primary reasons pricing has now become a strategic initiative within many businesses. For change to occur in how companies do their pricing strategies, it often takes a senior executive to manage the change in processes and systems to ensure pricing becomes strategy and shifts away from being tactical in focus (Marn, oegner, Zawada, 26).
From the sell-side or the distribution and selling channels standpoint, pricing has never been more critically important to a company's profitability. The continued consolidation of industries and commoditization of products making tracking pricing elasticity by product category critical, especially when they are sold through…...

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References

Manu Carricano, Jean-Francois Trinquecoste, and Juan-Antonio Mondejar. "The rise of the pricing function: origins and perspectives. " the Journal of Product and Brand Management 19.7 (2010): 468.

Thomas H. Davenport. "Make Better Decisions. " Harvard Business Review 1 Nov. 2009

Vrinda Kadiyali, Pradeep Chintagunta, and Naufel Vilcassim. "Manufacturer-retailer channel interactions and implications for channel power: An empirical investigation of pricing in a local market. " Marketing Science 19.2 (2000): 127.

Krishna, a., F. Feinberg, and Z. Zhang. "Should Price Increases Be Targeted?-Pricing Power and Selective vs. Across-the-Board Price Increases. " Management Science 53.9 (2007): 1407-1422.

Pricing Method
In any market, there is bound to be a strategy that is used to decide on the prices that the commodities or the services that the potential clients will be in need of. Since the goods or the services availed are always targeted at making a profit at the end o the day, pricing is one of the most fundamental focuses that the entrepreneurs have to keenly look at in order to strike a balance between making profit and retaining clients for the item offered.

In the case scenario below, the pricing methods that should b used in determining the prices of canned vegetables and Aspirin are looked at, the various methods that can be used and how different the pricing methods are as well discussed.

Pricing method for canned vegetables

Taking into account that almost each food outlet has canned vegetables, with several alternatives floated by each outlet, it is important…...

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References

Scott Allen, (2012). Pricing Methods: Four Models for calculating your Pricing. Retrieved November 27, 2012 from  http://entrepreneurs.about.com/od/salesmarketing/a/pricingstrategy_2.htm 

Commonwealth of Australia, (2009). Policies, Procedures and Methods Used in the Recommendations for Pricing of Pharmaceutical Products 2009. Retrieved November 27, 2012 from  http://www.health.gov.au/internet/publications/publishing.nsf/Content/health-pbs-pbpa-pricing-policiesdoc~pricing-methods

The penetration pricing strategy is intended to be temporary, such that once the desired market effect has occurred -- the penetration has been made -- the price is then put to a more "normal" price.
An example of this in recent news is the introduction by Burger King of BK Smooth Roast Coffee. This new blend of coffee was developed to make Burger King more competitive in the fast food breakfast business, where it trails the market leaders badly. The new blend was offered with an introductory price of 25 cents (QSR eb.com, 2013). The objective of this pricing strategy was twofold. The first objective was penetration -- to get people to try the coffee in the hopes of winning over some converts. Ideally, the customer would come in daily during the promotion because this is the cheapest coffee around, and develop a habit.

The other objective is to bring people…...

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Works Cited:

Clow, J. (2012). What small businesses can learn from Google. USA Today. Retrieved March 9, 2013 from  http://usatoday30.usatoday.com/money/smallbusiness/story/2012-05-27/small-business-can-learn-from-google/55188670/1 

QSR Web. (2013). Burger King celebrates new coffee with 25-cent promotion. QSR Web. Retrieve March 9, 2013 from  http://www.qsrweb.com/article/208731/Burger-King-celebrates-new-coffee-with-25-cent-promotion

Value-based pricing is critically important in B2B marketing and selling scenarios as well, as the value delivered by enterprise software for example determines the percentage of maintenance paid every year (Hinterhuber, 2004). These maintenance payments yearly form the foundation of Oracle Corporations;' viability, in addition to many hundreds of other enterprise software companies. As a result of the critical role of value-based pricing in market positioning, companies have created pricing and revenue management enforcement strategies (oll, 2009) to ensure their resellers, channel partners, dealers and service organizations do not price below the minimum threshold and I so doing erode the market position as defined by the premium price.
Summary

Studies indicate that to the extent a company can successfully manage and fine tune value-based pricing over time is the extent to which they can experience revenue and profit growth even in the middle of a recession (Garrow, Ferguson, 2009). Value-based pricing…...

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References

Dunleavy, H., and G. Phillips. 2009. The future of airline revenue management. Journal of Revenue and Pricing Management: Special Issue: 'AGIFORS Conference' 8, no. 4, (August 1): 388-395.

Garrow, L., and M. Ferguson. 2009. Staying ahead of the curve: Using revenue management to help survive an economic downturn. Journal of Revenue and Pricing Management: Special Issue: Distribution and Revenue Management 8, no. 2-3, (March 1): 279-286.

Andreas Hinterhuber. 2004. Towards value-based pricing - An integrative framework for decision making. Industrial Marketing Management 33, no. 8, (November 1): 765-778.

Michael V Marn, Eric V Roegner, and Craig C. Zawada. 2003. The power of pricing. The McKinsey Quarterly no. 1, (January 1): 26-39.

Popular Cost of Equity Models: Problems and Potentials in Current Theory and Practice
It is important for any publicly traded business organization to understand and accurately estimate its cost of equity capital, in order to make effective capital-raising resource allocation decisions. There are several models for determining a supposedly accurate valuation for the current cost of equity capital for a given firm, however each of these models is imperfect in its approach and its ultimate assessment. The following pages provide an overview of three popular models for providing this valuation, assessing the models base don ease of use, accuracy of the prediction, and the degree to which the assumptions made or implied by the model are reflective of reality and actual operational capabilities. A final recommendation for a particular model is made following this assessment.

Ease of Use

One of the most straightforward methods for estimating the cost of equity capital, or…...

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References

Investopedia.com (2012). Financial concepts: capital asset pricing model (CAPM). Retrieved March, 2012, from  http://www.investopedia.com/university/concepts/concepts8.asp 

Money Terms (2012). Arbitrage pricing theory. Retrieved March, 2012, from  http://moneyterms.co.uk/apt/ 

Pages.stern.nyu.edu (n.d.). Dividend discount models. Retrieved March, 2012, from  http://pages.stern.nyu.edu/~adamodar/pdfiles/valn2ed/ch13.pdf

CAPM
There are several different models that can be used to help determine the cost of capital for a company. Each is based on a model, and can be understood not only in terms of its formula but also in terms of its underlying assumptions. These assumptions will provide the foundation for the model, and will inform the financial manager about the strengths and weaknesses of each model. This report will outline in detail three such major models for determining the cost of capital. The first is the capital asset pricing model, known as CAPM. The second is the dividend discount model, and the third is arbitrage pricing theory.

The capital asset pricing model is the first of the three major models for determining the cost of capital. CAPM is widely used to determine the cost of equity in particular. The underlying theory of CAPM is that stock returns relative to risk…...

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References:

Investopedia. (2013). Capital asset pricing model. Investopedia. Retrieved September 15, 2013 from  http://www.investopedia.com/terms/c/capm.asp 

Investopedia. (2013). Digging into the dividend discount model. Investopedia. Retrieved September 15, 2013 from  http://www.investopedia.com/articles/fundamental/04/041404.asp 

Investopedia. (2013). Definition of arbitrage pricing theory Investopedia. Retrieved September 15, 2013 from  http://www.investopedia.com/terms/a/apt.asp

Finance
Any Asset Pricing Theory forms the basic foundation of finance theory, in that it deals with the value of any asset under unknown or uncertain circumstances. The relationship between an asset and its price is the mainstay of the asset pricing theory: the lower the price, the poorer the expected performance. The Arbitrage Pricing Theory derives from this theory. The basic idea in the APT theory is that any sort of risk in asset returns must not affect the pricing of the asset in any way; it must depend on the covariance of assets with the risk factors. (Bayesian Approach of the Arbitrage Pricing Theory) The APT originated from Stephen oss, 1976-1978. oss had used a statistical procedure for assets returns, with the belief that there are in existence no arbitrage probabilities. The APT must of necessity involve a lot of risk taking processes, (Definition of Arbitrage Pricing Theory.)

While CAPM,…...

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References

An Introduction to Investment Theory" Retrieved at   Accessed on 29 July, 2004http://viking.som.yale.edu/will/finman540/classnotes/class6.html .

Bayesian Approach of the Arbitrage Pricing Theory" Retrieved at   on 29 July, 2004http://64.233.167.104/search?q=cache:Sa6l536IAccessed 

Capital Asset Pricing Model" Retrieved at   Accessed on 29 July, 2004http://www.investorwords.com/698/Capital_Asset_Pricing_Model.html .

Definition of Arbitrage Pricing Theory" Retrieved at   on 29 July, 2004http://economics.about.com/cs/economicsglossary/g/apt.htm?terms=economic+theoryAccessed 

CAPM
There are three models that can be used calculate the cost of capital for the firm. The first such model is the capital asset pricing model (CAPM). The CAPM formula is: E (rj )= RRF + b (RM - RRF). This means that the company's cost of capital is a function of the risk free rate, the market premium and the firm-specific risk. In CAPM, the firm-specific risk is based on the correlation of the company's stock price to the broader market, a statistic known as the beta.

Another method is the dividend growth model. In this model, the assumption is that a stock's value derives solely from the dividends that it is paying, or that investors assume it will pay in the future. It is assumed that investors will not pay for capital gains, because those are uncertain. The formula for the dividend growth model is:

source: Investopedia.

This model assumes that…...

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Works Cited:

Investopedia. (2011). Dividend discount model. Investopedia. Retrieved November 20, 2011 from  http://www.investopedia.com/terms/d/ddm.asp#axzz1eCRhOJF0

Table 2, elationships in MNSC problem provide an analysis of these factors in the form of a decision matrix of transfer prices, transport cost allocations and trade quantities from an import and expert standpoint (Villegas, Ouenniche, 2008).
This is one of the more useful aspects of this article, in that it extrapolates the near-term decisions of transfer pricing systems directly and materially into the financial reporting of the firm in the same fiscal period. There is also the quantification of the MNSC purely from the effects of cross-supplier and supplier-buyer collaboration which gets much coverage in the industry press, yet lacks the quantification from a financial standpoint this article provides. The quantification of MNSC-based decisions purely on transfer pricing that is market-based leads to higher levels of volatility and uncertainty of earnings yet also gives firms a great control over the competitiveness of fulfilling their own demand over time. The…...

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References

Villegas, F., and J. Ouenniche. 2008. A general unconstrained model for transfer pricing in multinational supply chains. European Journal of Operational Research 187, no. 3, (June 16): 829.

Black-Scholes model is essentially a formula used in the calculation of a theoretical call price for options. It is considered to be the fundamental model for pricing in the option market (Cretien, 2006). This model uses in its calculation the five main determinants of an option's price, which include stock price, strike price, volatility, time left until expiration, as well as risk-free, short-term interest rate (Hoadley, 2010). The computations executed by the Black-Scholes model result in prices that are close to actual market value as long as input variables are determined that are reasonably accurate (Cretien, 2006). A benefit resulting from the use of this model is that it provides traders with a means to compare market prices with alternative values while using different inputs (Cretien, 2006). The Black-Scholes model also assists in the prediction of movements in price for investments other than options by providing a way to compute…...

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References

Crawford, Gregory. "A new model; The world of finance was changed when Myron Scholes and Fischer Black penned a paper on how to price an option.(P&I at 30: The class of '73)." Pensions & Investments. Crain Communications, Inc. 2003. HighBeam Research. 8 Dec. 2010 .

Cretien, Paul D. "Comparing option pricing models." Futures. . 2006. HighBeam Research. 8 Dec. 2010 .

Hoadley, Peter, (2010). Option pricing models and the 'Greeks'. Hoadley Trading and Investment Tools. Retrieved from   8 Dec. 2010.http://www.hoadley.net/options/bs.htm 

McKenzie, Scott; Gerace, Dionigi; Subedar, Zaffar. "AN EMPIRICAL INVESTIGATION OF THE BLACK-SCHOLES MODEL: EVIDENCE FROM THE AUSTRALIAN STOCK EXCHANGE." Australasian Accounting Business & Finance Journal. University of Wollongong School of Accounting and Finance. 2007. HighBeam Research. 8 Dec. 2010 .

CAPM
There are three different models for estimating the cost of capital -- the capital asset pricing model (CAPM), dividend discount model and arbitrage pricing theory (APT). Of these, CAPM is the best model. CAPM utilizes the returns on the company's stock to calculate the firm's cost of equity. The underlying theory is that the firm's cost of capital should "equal the rate on a risk-free security plus a risk premium" (Investopedia, 2012). The risk premium is related to the return on the company's stock. Arbitrage pricing theory is similar, using the same formula but instead of equating risk with the market return on the company's stock vs. The broad market index, the return on the company's stock is compared to a basket of macroeconomic indicators (Pietersz, 2011). These are chosen by the user, and the correlations must be calculated by the user and the weightings of the different indicators also…...

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Works Cited:

Investopedia. (2012). Capital asset pricing model -- CAPM. Investopedia. Retrieved January 16, 2012 from  http://www.investopedia.com/terms/c/capm.asp 

Pietersz, G. (2011). Arbitrage pricing theory. MoneyTerms.co.uk. Retrieved January 16, 2012 from  http://moneyterms.co.uk/apt/

Delivery Process Outline Differences between USPS and Other Courier Services

The United States Postal Service (USPS) and private courier services like FedEx, UPS, and DHL operate under distinct delivery process outlines that impact their service offerings, efficiency, and cost structures. Here are the key differences between the USPS and other courier services:

1. Delivery Infrastructure:

USPS: The USPS possesses an extensive network of post offices, distribution centers, and dedicated delivery routes that span the entire United States. This vast infrastructure allows the USPS to deliver to every address in the country, including remote and underserved areas.
Courier Services: Private courier services typically....

Cloud Computing's Impact on e-Learning and e-Teaching in South African Schools Post-COVID-19
Introduction:
The post-COVID-19 era has witnessed a significant surge in the adoption of cloud computing in education. South African schools have embraced cloud-based solutions to enhance e-learning and e-teaching, transforming the educational landscape.
Accessibility and Flexibility:
Cloud-based platforms provide seamless access to educational resources anytime, anywhere. Students can access lessons, assignments, and educational tools remotely, eliminating geographic barriers and enabling flexible learning. This flexibility allows students to balance their studies with other commitments, such as extracurricular activities or work.
Enhanced Collaboration:
Cloud computing fosters collaboration between students and teachers. Shared online workspaces facilitate group....

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Successful entrepreneurs often take an innovative approach to differentiate themselves in the market by focusing on the following strategies:

1. Unique value proposition: Successful entrepreneurs identify a specific need or problem in the market and offer a unique solution that sets them apart from competitors. This could be a new product or service, a different pricing model, or a more convenient or efficient delivery method.

2. Customer-centric approach: Entrepreneurs who prioritize customer needs and preferences are more likely to succeed. By listening to customer feedback, addressing pain points, and delivering exceptional customer service, entrepreneurs can build strong relationships and differentiate themselves from....