Pricing warrants: an empirical study of the Black-Scholes model and its alternatives
Article Abstract:
This paper uses a sample of over 25,000 daily warrant prices to empirically investigate potential problems with the commonly used warrant pricing model proposed by Black and Scholes as an extension of their call option model. One problem seems to be especially important: the constant variance assumption of the dilution adjusted Black-Scholes model appears to cause biases in model prices for almost all warrants and over the entire sample period. We show that more accurate price forecasts are obtained with a specific form of the constant elasticity of variance model. (Reprinted by permission of the publisher.)
Publication Name: Journal of Finance
Subject: Business
ISSN: 0022-1082
Year: 1990
User Contributions:
Comment about this article or add new information about this topic:
Inferring trade direction from intraday data
Article Abstract:
This paper evaluates alternative methods for classifying individual trades as market buy or market sell orders using intraday trade and quote data. We document two potential problems with quote-based methods of trade classification: quotes may be recorded ahead of trades that triggered them, and trades inside the spread are not readily classifiable. These problems are analyzed in the context of the interaction between exchange floor agents. We then propose and test relatively simple procedures for improving trade classifications. (Reprinted by permission of the publisher.)
Publication Name: Journal of Finance
Subject: Business
ISSN: 0022-1082
Year: 1991
User Contributions:
Comment about this article or add new information about this topic:
- Abstracts: Warrant exercise, dividends, and reinvestment policy. Term structure multiplicity and clientele in markets with transactions costs and taxes
- Abstracts: Corporate dividends and seasoned equity issues: an empirical investigation. Debt management under corporate and personal taxation
- Abstracts: Examining the effects of positive social labeling, time, and request sizes on compliance in a multistage marketing survey context
- Abstracts: Managerial cognition and the mimetic adoption of market positions: what you see is what you do. Beyond the reach of the invisible hand: impediments to economic activity, market failures, and profitability
- Abstracts: International portfolio investment flows. Estimation and test of a simple model of intertemporal capital asset pricing