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Author: Isabel Abinzano Publisher: ISBN: Category : Languages : en Pages : 30
Book Description
We propose a valuation framework for pricing European call warrants on the issuer's own stock that allows for debt in the issuer firm. In contrast to other works which also price warrants with dilution issued by levered firms, ours uses only observable variables. We extend the models of both Crouhy and Galai (1994) and Ukhov (2004). We provide numerical examples to study some implementation issues and to compare the model with existing ones.
Author: Isabel Abinzano Publisher: ISBN: Category : Languages : en Pages : 30
Book Description
We propose a valuation framework for pricing European call warrants on the issuer's own stock that allows for debt in the issuer firm. In contrast to other works which also price warrants with dilution issued by levered firms, ours uses only observable variables. We extend the models of both Crouhy and Galai (1994) and Ukhov (2004). We provide numerical examples to study some implementation issues and to compare the model with existing ones.
Author: Andrey Ukhov Publisher: ISBN: Category : Languages : en Pages : 15
Book Description
The classical warrant pricing formula requires knowledge of the variance of the firm value process, and the firm value. When warrants are outstanding the firm value itself is a function of the warrant price. Firm value and the variance of the firm value are then unobservable variables. I develop an algorithm for pricing warrants using stock prices, an observable variable, and variance of stock returns. The method also enables estimation of the variance of firm value. A proof of existence of the solution is provided.
Author: Andrey Ukhov Publisher: ISBN: Category : Languages : en Pages :
Book Description
The classical warrant pricing formula requires knowledge of the firm value and the variance of the firm value process. When warrants are outstanding the firm value itself is a function of the warrant price. Firm value and the variance of the firm value are then unobservable variables. I develop an algorithm for pricing warrants using stock prices, an observable variable, and variance of stock returns. The method also enables estimation of the variance of firm value. A proof of existence of the solution is provided.
Author: Emanuele Bajo Publisher: ISBN: Category : Languages : en Pages : 23
Book Description
The exercise of a warrant leads to the well-known dilution phenomenon, whose effects have been extensively studied over the last four decades. In contrast, the existing literature has paid inadequate attention to the volatility spillover between stockholders and warrant holders. This ldquo;risk-shifting effectrdquo; has significant implications on warrant pricing, since any formula that assumes a constant volatility of stock returns produces a bias, as we document in this paper. We prove that a CEV process with a specific elasticity parameter properly models the stochastic volatility of stock returns for a firm with warrants outstanding. Besides, contrarily to most of the existing warrant pricing approaches, we propose a closed-form formula (exclusively based on observable market variables) able to absorb the risk-shifting bias.
Author: Massimiliano Barbi Publisher: ISBN: Category : Languages : en Pages : 8
Book Description
At a first approximation, equity warrants are option-like securities: in fact, they are transferable certificates which entitle the holder to buy a specific number of shares of the issuing company, at a given price, at an agreed time in the future. Accordingly, the pricing of warrants is usually performed by application of the standard option pricing theory. However, the presence of some specific features (e.g., the equity dilution) prevents from using simple plain-vanilla formulas and adds a certain degree of complication to the analysis. The purpose of this study is to present the different (and sometimes controversial) warrant pricing approaches provided by the financial literature and describe the assumptions they are based upon. By means of these formulas we price a current Italian warrant listed at Borsa Italiana and we show the mispricing we obtain with respect to the actual market price. This article is intended to address the common pricing errors made by academics and practitioners, shedding some light on the warrants' valuation process.
Author: Guy Wanjialin Publisher: iUniverse ISBN: 0595310184 Category : Languages : en Pages : 443
Book Description
A world without accounting means confusion and chaos. Accounting is not only used in the business world, but rather it is used by everyone in all types of situations. Tax touches every aspect of our lives. People are talking about tax on the TV, the radio, newspaper, and the Internet. Life has grown, as a whole, toward higher levels of complexity. The language of accounting and taxation is also expanding: More and more new words are created, and new meanings are added to the old words. Do you know the meaning of these words: ad hoc, accounting bath, below-water, blackout, capex, carve-out, e-tax, postil, Sarbanes-Oxley, strata...? Each term has its unique meaning you may not be able to find a definition in an ordinary dictionary. "An International Dictionary of Accounting & Taxation" is a book with more than 12,000 entries drawn from accounting, auditing and taxation. Each entry has a clear one-sentence definition right to the point. Whether you are an accountant, CPA, tax professional or amateur, you will find this dictionary of immeasurable help.
Author: Gunyawee Teekathananont Publisher: ISBN: Category : Languages : en Pages : 110
Book Description
This study investigates three multiple warrant pricing models (the Lim-Terry model, the Darsinos-Satchell model and the Dennis-Rendleman model) and a standard warrant pricing model (the Galai-Schneller model) by using warrant data from the Stock Exchange of Thailand. The multiple warrant pricing models are expected to improve the standard model since the potential dilution effects across warrant series (the subtle slippage effect and the cross-dilution effect) are considered. All of the theoretical warrant values are compared with market prices and with each other. In addition, the pricing error statistics of each model are examined in various situations: in-the-money, at-the-money, out-the-money. The empirical results reveal that all the model tend to overestimate the market prices. The standard model performs worst. The model incorporated with both of the subtle slippage and cross-dilution effects outperform the others and provide best estimates for in-the-money warrants. It is obvious that the dilution effects across warrant series have a profound influence on valuating multiple warrants. Exercising each warrant series results in a decrease in the firm value and hence affects the exercising decision of the other series. Consequently, the subtle slippage effects and the cross-dilution effect should be taken into account when multiple warrants are valued.
Author: Simon Benninga Publisher: McGraw-Hill/Irwin ISBN: Category : Business & Economics Languages : en Pages : 472
Book Description
Financial valuation tools - Using financial reporting information - Valuation : processes and principles - Building pro-forma financial statements - Analyzing the firm's environment - Analyzing the firm's operations - J.M. Smucker-projecting financial performance - Capital structure and the cost of capital - Estimating discount rates - Valuation by multiples - Valuing the firm's debt - The valuation of convertible securities - Valuing equity cash flows directly - Final remarks.
Author: American Statistical Association. Business and Economic Statistics Section Publisher: ISBN: Category : Commercial statistics Languages : en Pages : 472
Author: Isabel Abinzano
Author: Isabel Abinzano
Author: Andrey Ukhov
Author: Andrey Ukhov
Author: Emanuele Bajo
Author: Massimiliano Barbi
Author: Guy Wanjialin
Author: Gunyawee Teekathananont
Author: Evgeny Lyandres
Author: Simon Benninga
Author: American Statistical Association. Business and Economic Statistics Section