Warrant Pricing and Listing in an Emerging Market: The Case of Thailand
36 Pages Posted: 4 Jun 2007
Date Written: December 1998
This study proposes a more complete model to pricing warrant by taking into account the expected cash infusion when warrants are exercised. The model can be extended to pricing the warrant of levered firm. In addition, the paper suggests an alternative test to examine the impact of warrant listing on volatility of the underlying stocks. The alternative test can avoid the bias from change in capital structure of the sample. This bias partly explains contradicting empirical results found in previous literature. Using daily data during 1994 to 1997 of warrants listed on the Stock Exchange of Thailnd, it finds that there exists the impact which helps stabilizing the volatility of underlying stock and pull down stock price.
Keywords: warrant,levered firm valuation,volatility,thailand
JEL Classification: G13
Suggested Citation: Suggested Citation