Pricing levered warrants with dilution using observable variables

• Autores: María Isabel Abínzano Guillén, Javier F. Navas
• Localización: Notas técnicas: [continuación de Documentos de Trabajo FUNCAS], ISSN-e 1988-8767, Nº. 450, 2009
• Idioma: inglés
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• 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.