Tests of warrant pricing models: The trading profits perspective

Shmuel Hauser; Beni Lauterbach

doi:10.3905/jod.1996.407970

Tests of warrant pricing models: The trading profits perspective

Shmuel Hauser
, Beni Lauterbach

School of Business Administration

Ben-Gurion University of the Negev

Research output: Contribution to journal › Article › peer-review

14 Scopus citations

Abstract

This study estimates and compares the trading profits generated by Jour different warrant pricing models. The assumption is that a "more correct" pricing model would demonstrate higher trading excess returns. In a large sample of about 19,000 warrant price observations, the constant elasticity of variance-based models are found to be superior to the Black-Schohs model in identifying mispriced warrants and profit opportunities. The advantage of the constant elasticity of variance models is particularly strong and statistically significant in out-of-the-money and long time to expiration warrants.

Original language	English
Pages (from-to)	71-79
Number of pages	9
Journal	Journal of Derivatives
Volume	4
Issue number	2
DOIs	https://doi.org/10.3905/jod.1996.407970
State	Published - 1 Dec 1996

Bibliographical note

Funding Information:
We are grateful to the ANDRS and MESRS (DG/RSDT) for financial support and to Mr. Abaza (Amman university, Jordan) for technical help.

Funding

We are grateful to the ANDRS and MESRS (DG/RSDT) for financial support and to Mr. Abaza (Amman university, Jordan) for technical help.

Funders
DG/RSDT
Ministère de l’Enseignement Supérieur et de la Recherche Scientifique
Agence Nationale pour le Développement de la Recherche en Santé

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10.3905/jod.1996.407970

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Tests of warrant pricing models: The trading profits perspective

Abstract

Bibliographical note

Funding

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