Empirical Study Of Black-Scholes Warrant Pricing Model On The Stock Exchange Of Malaysia
| dc.contributor.author | BOON KYUN, HONG | |
| dc.date.accessioned | 2016-08-03T04:00:50Z | |
| dc.date.available | 2016-08-03T04:00:50Z | |
| dc.date.issued | 2004-03 | |
| dc.description.abstract | This paper addresses the question of how well the best-known warrant! option pricing model - the Black-Scholes model - work in the stock exchange of Malaysia. Results of most studies (Rubinstein, 1981; Geske, Roll, & Shastri, 1983; Scott, 1987) have been positive in that the Black-Scholes model generates warrant values fairly close to the actual prices at which warrants trade especially for shorter term maturity warrants. Nevertheless, some regular empirical failures of the model have been noted (Macbeth & Merville, 1980; Lauterbach & Schultz, 1990). The Black- Scholes model tends to overvalue 'in-the-money' warrants and undervalue 'out-of-. the-money' warrants. The objective of this paper is to test the warrant market behavior in relation to the application of Black-Scholes model to a relatively small and less liquid market - Kuala Lumpur Stock Exchange (KLSE). This study considered various pricing biases related to warrant strike price, time to maturity, volatility, and pre- and post-Asian financial crisis period. This paper has tested the model using daily prices of 74 sample warrants in the year 1994-2003. The results revealed that overall model prices were significantly below market prices and further indicated both the model and market prices deviate in certain systematic patterns as. for the above various pricing biases. It was concluded that users of Black-Scholes model should carefully observe the systematic pattern of deviation when choosing an investment of warrants in the Malaysian stock exchange. | en_US |
| dc.identifier.uri | http://hdl.handle.net/123456789/2376 | |
| dc.subject | Empirical Study Of Black-Scholes Warrant Pricing Model | en_US |
| dc.subject | On The Stock Exchange Of Malaysia | en_US |
| dc.title | Empirical Study Of Black-Scholes Warrant Pricing Model On The Stock Exchange Of Malaysia | en_US |
| dc.type | Thesis | en_US |
Files
License bundle
1 - 1 of 1
Loading...
- Name:
- license.txt
- Size:
- 1.71 KB
- Format:
- Item-specific license agreed upon to submission
- Description: