An Analysis of the Covered Warrants Listed on the Athens Exchange

Siriopoulos, C. and Fassas, A. (2014) An Analysis of the Covered Warrants listed on the Athens Exchange. Journal of Risk & Control, 1(1), pp. 13-30.

18 Pages Posted: 23 Mar 2015 Last revised: 24 Mar 2015

See all articles by Costas Siriopoulos

Costas Siriopoulos

Zayed University, College of Business; University of Patras - Business Administration

Athanasios Fassas

University of Thessaly; Hellenic Open University

Date Written: March 21, 2015

Abstract

The particular study is the first academic attempt to review a new financial instrument, the covered warrants, which were listed for trading in the Athens Exchange within the framework of the recapitalization of the three systematic Greek banks (Alpha Bank, National Bank of Greece and Piraeus Bank) in the summer of 2013. In particular, we discuss the basic characteristics of these instruments and we examine their pricing efficiency during the fifteen months of their listing.

The empirical results suggest that the Greek warrants market is inefficient as the three listed contracts are systematically underpriced compared to their theoretical value based on the historic realized volatility of the underlying shares. Furthermore, a dynamic delta-hedged warrant portfolio yields significant cumulated gains that exceed the risk-free rate.

Keywords: Warrants, Cox-Ross-Rubinstein model, Greek banks, Implied volatility, Delta hedging

JEL Classification: G13, G23

Suggested Citation

Siriopoulos, Costas and Fassas, Athanasios, An Analysis of the Covered Warrants Listed on the Athens Exchange (March 21, 2015). Siriopoulos, C. and Fassas, A. (2014) An Analysis of the Covered Warrants listed on the Athens Exchange. Journal of Risk & Control, 1(1), pp. 13-30., Available at SSRN: https://ssrn.com/abstract=2583230

Costas Siriopoulos

Zayed University, College of Business ( email )

P.O. Box 144534
Abu Dhabi
United Arab Emirates

University of Patras - Business Administration ( email )

Patras
Greece

Athanasios Fassas (Contact Author)

University of Thessaly ( email )

Argonafton & Filellinon
38221 Volos, 41110
United States

Hellenic Open University ( email )

Parodos Aristotelous 18
Patra, 26335
Greece

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