TY - JOUR
T1 - The relative performance of five alternative warrant pricing models
AU - Hauser, Shmuel
AU - Lauterbach, Beni
PY - 1997
Y1 - 1997
N2 - 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.
AB - 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.
UR - http://www.scopus.com/inward/record.url?scp=0002495516&partnerID=8YFLogxK
U2 - 10.2469/faj.v53.n1.2056
DO - 10.2469/faj.v53.n1.2056
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AN - SCOPUS:0002495516
SN - 0015-198X
VL - 53
SP - 55
EP - 61
JO - Financial Analysts Journal
JF - Financial Analysts Journal
IS - 1
ER -