Pricing levered warrants with dilution using observable variables

  1. María Isabel Abínzano Guillén
  2. Javier F. Navas
Journal:
Documentos de Trabajo FUNCAS

ISSN: 1988-8767

Year of publication: 2009

Issue: 450

Pages: 1

Type: Working paper

DIALNET GOOGLE SCHOLAR lock_openOpen access editor

More publications in: Documentos de Trabajo FUNCAS

Abstract

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.

Data source: Dialnet