Warrant pricing: a review of empirical research |
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Authors: | Chris Veld |
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Institution: | 1. Department of Fiscal Economics and Department of Finance , CentER at Tilburg University , P.O. Box 90153, LE Tilburg , NL-5000 , the Netherlands C.H.Veld@kub.nl |
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Abstract: | Recently, several warrant pricing studies have become available for different models as well as for different countries. The most important conclusions that can be drawn from reviewing these studies are: (1) it is not necessary to make a correction on option valuation models for the dilution effect; (2) the only model that systematically outperforms the Black-Scholes (1973) type models is the Square Root model; (3) US and German warrants seem to be priced correctly, while deviations are found for English and Japanese warrants (underpriced by the market) and Swiss and Dutch warrants (overpriced by the market). |
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Keywords: | warrants Black/Scholes model option pricing warrant pricing dilution |
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