Pricing levered warrants with dilution using observable variables
- Abínzano Guillén, María Isabel
- F. Navas, Javier
ISSN: 1988-8767
Año de publicación: 2009
Número: 450
Tipo: Documento de Trabajo
Otras publicaciones en: Documentos de Trabajo FUNCAS
Resumen
We propose a valuation framework for pricing European call warrants on the issuer's own stock, allowing for the possibility of the issuer firm being debt-financed. In contrast to other works which also price warrants with dilution issued by levered firms, ours uses only observable variables. Thus, 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.