Roslan, Teh Raihana Nazirah and Karim, Sharmila and Jameel, Ali Fareed Dynamic Pricing Formulation for Hybrid Equity Warrants (S/O 14193). Project Report. UUM. (Submitted)

PDF - Submitted Version Restricted to Registered users only Download (1MB) | Request a copy

Abstract

Equity warrants provide the option of purchasing stocks at specific exercise price and time. This study develops hybrid equity warrants’ pricing formula using Heston-CIR model by considering the volatility and interest rate as stochastic processes. Analytical pricing formulas for hybrid equity warrants are derived using Cauchy transformation and partial differential equation approaches. Next, the local optimization method is used to estimate all model parameters via calibration to the real market and evaluated against the Black-Scholes model and the Noreen Wolfson model. Our model gives a good fit to the market prices and performs the best in statistical error measurements. Additionally, our study on warrants’ moneyness revealed that most of the warrants involved are in-the-money, which offers great returns to investors

Item Type:	Monograph (Project Report)
Additional Information:	GERAN FRGS
Subjects:	Q Science > QA Mathematics
Divisions:	Research and Innovation Management Centre (RIMC)
Depositing User:	Mdm. Sarkina Mat Saad @ Shaari
Date Deposited:	18 Nov 2024 11:59
Last Modified:	18 Nov 2024 11:59
URI:	https://repo.uum.edu.my/id/eprint/31563

Actions (login required)

View Item