Author: Douglas MacLennan PattersonPublisher:
ISBN:
Category : Capital market
Languages : en
Pages : 396
Book Description
Warrant Prices in the Concept of the Option Pricing Model
Author: Douglas MacLennan PattersonPublisher:
ISBN:
Category : Capital market
Languages : en
Pages : 396
Book Description
Warrant Prices in the Context of the Option Pricing Model and the Efficiency of the New York Stock Exchange
Author: Douglas MacLennan PattersonPublisher:
ISBN:
Category : New York (N.Y.)
Languages : en
Pages : 406
Book Description
Contingency Approaches to Corporate Finance
Author: Dan GalaiPublisher: World Scientific Publishing Company
ISBN: 9789814730723
Category : Corporations
Languages : en
Pages : 2036
Book Description
Black and Scholes (1973) and Merton (1974) (hereafter referred to as BSM) introduced the contingent claim approach (CCA) to the valuation of corporate debt and equity. The BSM modeling framework is also named the 'structural' approach to risky debt valuation. The CCA approach considers all stakeholders of the corporation as holding contingent claims on the assets of the corporation. Each claim holder has different priorities, maturities and conditions for payouts. It is based on the principle that all the assets belong to all the liability holders.In the structural approach the arrival of the default event relies on economic arguments for why firms default as it is explicitly related to the dynamics of the economic value of the firm. A standard structural model of default timing assumes that a corporation defaults when its assets drop to a sufficiently low level relative to its liabilities.The BSM modeling framework gives the basic fundamental version of the structural model where default is assumed to occur when the net asset value of the firm at the maturity of the pure-discount debt becomes negative, i.e., market value of the assets of the firm falls below the market value of the firm's liabilities. In a regime of limited liability, the shareholders of the firm have the option to default on the firm's debt. Equity can be viewed as a European call option on the firm's assets with a strike price equal to the face value of the firm's debt. Actually, CCA can be used to value all the components of the firm's liabilities. Option pricing models are used to value stocks, bonds, and many other types of corporate claims.Different versions of the model correspond to different assumptions about the conditions when a firm defaults. Merton (1974) assumes that the firm only defaults at the maturity date of the firm's outstanding debt when the net asset value of the firm, in market value terms, is negative. Others introduce other conditions for default. Also, different authors introduce more complicated capital structure with different kinds of bonds (e.g. senior and junior), warrants, corporate taxes, ESOP, and more. Volume 1: Foundations of CCA and Equity ValuationVolume 1 presents the seminal papers of Black and Scholes (1973) and Merton (1973, 1974). This volume also includes papers that specifically price equity as a call option on the corporation. It introduces warrants, convertible bonds and taxation as contingent claims on the corporation. It highlights the strong relationship between the CCA and the Modigliani-Miller (M&M) Theorems, and the relation to the Capital Assets Pricing Model (CAPM). Volume 2: CCA Approach to Corporate Debt ValuationVolume 2 concentrates on corporate bond valuation by introducing various types of bonds with different covenants as well as introducing various conditions that trigger default. While empirical evidence indicates that the simple Merton's model underestimates the credit spreads, additional risk factors like jumps can be used to resolve it. Volume 3: Issues in Corporate Finance with CCA ApproachVolume 3 includes papers that look at issues in corporate finance that can be explained with the CCA approach. These issues include the effect of dividend policy on the valuation of debt and equity, the pricing of employee stock options and many other issues of corporate governance. Volume 4: CCA Approach to Banking and Financial IntermediationVolume 4 focuses on the application of the contingent claim approach to banks and other financial intermediaries. Regulation of the banking industry led to the creation of new financial securities (e.g., CoCos) and new types of stakeholders (e.g., deposit insurers).
Options
Author: Lane HughstonPublisher:
ISBN: 9781899332663
Category : Business & Economics
Languages : en
Pages : 408
Book Description
A comprehensive and enlightening journey through the past, present and future of option pricing.
A Revisit to the Applicability of Option Pricing Models on the Hong Kong Warrants Market After the Stock Option Is Introduced
Author: Yue-Kwong LamPublisher:
ISBN: 9781361179604
Category :
Languages : en
Pages :
Book Description
This dissertation, "A Revisit to the Applicability of Option Pricing Models on the Hong Kong Warrants Market After the Stock Option is Introduced" by Yue-kwong, Lam, 林宇光, was obtained from The University of Hong Kong (Pokfulam, Hong Kong) and is being sold pursuant to Creative Commons: Attribution 3.0 Hong Kong License. The content of this dissertation has not been altered in any way. We have altered the formatting in order to facilitate the ease of printing and reading of the dissertation. All rights not granted by the above license are retained by the author. DOI: 10.5353/th_b3126728 Subjects: Options (Finance) Stock warrants - Mathematical models Stocks - Prices - China - Hong Kong
Call Option Pricing Model and Recovery Theorem
Author: Huy Hoang VuPublisher:
ISBN:
Category :
Languages : en
Pages : 26
Book Description
Warrant is normally priced on the basis of Black and Scholes' model, which refers to calculations in a risk neutral world. Hence, it neither captures the market expectation nor being a good reference for the risk management process. This study examines a new way of pricing warrants under the real world probability by utilizing the recovered Vacisek short rate model. Applying Carr and Yu's recovery model, an extended version of Ross Recovery Theorem, we managed to recover the Vasisek process. Then, suppose that the economy is driven by this recovered Vacisek process, we point out a valuation model for the warrant of an underlying stock. We deduce that by applying the recovered Vacisek model we can derive the warrant price under the real world probability without the assumption of the market price of risk as in the risk neutral model.
Option Pricing in the Presence of Warrants
Author: Georgia LekkasPublisher:
ISBN:
Category : Pricing
Languages : en
Pages : 0
Book Description
This study estimates option prices via a recombining binomial tree incorporating the effect of warrant dilution on the capital structure of the firm (Warrant Dilution Option-Pricing model--WDOP). The binomial lattice is constructed on the value of the firm under the assumption of constant volatility of the rate of return of the firm value. The mean percentage prediction error and the mean absolute value of the mean prediction error indicate that the predicted option prices deviate significantly from the observed option prices. The weak predicting performance of the WDOP model doesn't seem to follow a systematic pattern. This is true even when the sample is divided into subcategories based on option moneyness, and option and warrant life. We tested the WDOP model with one parameter, the volatility of the rate of return of the firm value, estimated out-of-sample. We compare the WDOP model with the Black Schole option-pricing model (hereafter B/S) applied to the options without taking into account the equity dilution effect. Finally, we calculate the warrant prices throughout the sample.
Options Markets
Author: George M. ConstantinidesPublisher:
ISBN:
Category : Options (Finance)
Languages : en
Pages : 680
Book Description
Financial Options
Author: Stephen FiglewskiPublisher: McGraw-Hill Companies
ISBN: 9781556238727
Category : Business & Economics
Languages : en
Pages : 596
Book Description
Financial Options links option theory with practical applications. Readers will find this book's approach simple to follow, with information organized for easy access that includes: institutional and theoretical frameworks for understanding options and option markets; how to apply option pricing models to specific types of markets; the numerical methods that must be applied to solve many option valuation problems.
Warrant Valuation in Rational Security Markets
Author: Herbert Joel WeinraubPublisher:
ISBN:
Category : Stock warrants
Languages : en
Pages : 204
Book Description