New Warrant Issues Valuation with Leverage and Equity Model Errors

Jean-Guy Simonato ()

Journal of Financial Services Research, 2015, vol. 47, issue 2, 247-272

Abstract: 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 prices of warrant, debt and equity in the presence of leverage. An empirical strategy, allowing for discrepancies between observed and theoretical equity prices, is then proposed to implement the model. Illustrations with two recent warrant issues are provided. Copyright Springer Science+Business Media New York 2015

Keywords: Warrants; Structural model; Leverage; Pricing model errors; C22; G1; G3 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (2)

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DOI: 10.1007/s10693-013-0183-1

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