Abstract
Five warrant pricing models are examined in this study: a pair based on the Black-Scholes model, a pair based on the constant elasticity of variance (CEV) modification, and an extendible-warrant model (à la Longstaff). Based on more than 20,000 warrant price observations, the flexible-exponent CEV model generates the lowest average absolute pricing error in most of the warrants examined. The dilution-adjusted Black-Scholes model, however, remains a reasonable, economical alternative in many cases.
Original language | English |
---|---|
Pages (from-to) | 55-61 |
Number of pages | 7 |
Journal | Financial Analysts Journal |
Volume | 53 |
Issue number | 1 |
DOIs | |
State | Published - 1 Jan 1997 |
ASJC Scopus subject areas
- Accounting
- Finance
- Economics and Econometrics