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A threshold model for the Hong Kong warrant prices

Kin Ming Wong () and Terence Tai Leung Chong ()

Applied Financial Economics Letters, 2008, vol. 4, issue 5, 337-339

Abstract: This article examines the factors that are not considered in the Black-Scholes model in determining the price of warrants. Using the outstanding percentage as a threshold variable, we test for the existence of threshold effect in warrant prices. It is shown that for warrants with a low outstanding percentage, an increase in the outstanding percentage will lower the call price. On the other hand, for warrants with high outstanding percentage, the call price is less affected by the outstanding percentage.

Date: 2008
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Handle: RePEc:taf:apfelt:v:4:y:2008:i:5:p:337-339