An empirical investigation of the factors that determine the pricing of Dutch index warrants

F.A. de Roon, C.H. Veld

Research output: Working paperDiscussion paperOther research output

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Abstract

This paper investigates the pricing of Dutch index warrants. It is found that when using the historical standard deviation as an estimate for the volatility, the Black and Scholes model underprices all put warrants and call warrants on the FT-SE 100 and the CAC 40, while it overprices the warrants on the DAX. When the implied volatility of the previous day is used the model prices the index warrants fairly well. When the historical standard deviation is used the mispricing of the call and the put warrants depends in a strong way on the mispricing of the previous trading day, and on the moneyness (in a nonlinear way), the volatility and the dividend yield. When the implied standard deviation of the previous trading day is used the mispricing of the call warrants is only related to the moneyness and to the estimated volatility, while the mispricing of put index warrants depends in a strong way on the moneyness, the volatility, the dividend yield and the remaining time to maturity.
Original languageEnglish
PublisherUnknown Publisher
Number of pages26
Volume1994-110
Publication statusPublished - 1994

Publication series

NameCentER Discussion Paper
Volume1994-110

Fingerprint

Warrants
Empirical investigation
Factors
Pricing
Mispricing
Standard deviation
Dividend yield
Implied volatility
Time to maturity

Keywords

  • Pricing
  • Financial Markets
  • finance

Cite this

de Roon, F. A., & Veld, C. H. (1994). An empirical investigation of the factors that determine the pricing of Dutch index warrants. (CentER Discussion Paper; Vol. 1994-110). Unknown Publisher.
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de Roon, FA & Veld, CH 1994 'An empirical investigation of the factors that determine the pricing of Dutch index warrants' CentER Discussion Paper, vol. 1994-110, Unknown Publisher.

An empirical investigation of the factors that determine the pricing of Dutch index warrants. / de Roon, F.A.; Veld, C.H.

Unknown Publisher, 1994. (CentER Discussion Paper; Vol. 1994-110).

Research output: Working paperDiscussion paperOther research output

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