The empirical analysis of new warrant issues in the context of a structural model of the firm typically assumes the absence of debt and a perfect equity pricing model. We examine here an approach relaxing these two assumptions. The proposed approach develops simple analytical expressions for the...

We propose a valuation framework for pricing European call warrants on the issuer's own stock that allows for debt in the issuer firm. In contrast to other works which also price warrants with dilution issued by levered firms, ours uses only observable variables. We extend the models of both...

This paper first examines the efficiency of the UK covered warrants market by adopting a stochastic dominance (SD) approach to examine market efficiency. Our empirical analyses reveal that neither covered warrants nor the underlying shares stochastically dominate each other, which implies that...

This case addresses securities that allow the holders to acquire stock directly from the issuing corporation either by purchase (warrants) or by exchanging convertible debt of the corporation for its stock. One can deem warrants and convertible debt as two different types of the same category of...

We show that the design of speculative retail products strongly influences the aggregate exposure of retail investors. Using proprietary data on bank-issued knock-out warrants, we find that individual investors trading these warrants, on aggregate, speculate against the short-term trend of the...

We develop a model for the demand of warrants by individual investors with regard to their sensitivity to issuer margins, defined as the relative overpricing with respect to the theoretical value. Based on an empirical data set we show that investors are relatively margin-sensitive; that is,...

We derive the effect of plausible deniability on asset risk premia in a dynamic setting with correlated firm values, systematic risk, and risk-averse investors. Firms optimally exercise American disclosure options, which are more valuable due to the possibility that other correlated firms may...

We derive the effect of plausible deniability on asset risk premia in a dynamic setting with correlated firm values, systematic risk, and risk-averse investors. Firms optimally exercise American disclosure options, which are more valuable due to the possibility that other correlated firms may...