Options
28 August 2008
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My client A acquired 66% of B from C, included in the contract was the clause that C can exchange the remaining shares in B with shares in A.
Is it an embedded derivative?
Do I only disclose this in accounts or should I calculate its fair value/Intrinsic as part of my acquisition calculations.
If I have to calculate the fair value do I use the normal Black Scholes etc?
Thanks
Aneel Dear Aneel
Being derivative it need to have:
Some notinal amount, underlying (changes in which could effect the fair value of the options), and no initial amount.
Since a fixed share swap ratio is not defined therefore the future transaction will be incurred at fair value.
Thanks and Regds.
Shabi
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