A review on Black-Scholes model in pricing warrants in Bursa Malaysia

Gunawan, Nur Izzaty Ilmiah Indra; Ibrahim, Siti Nur Iqmal; Rahim, Norhuda Abdul

doi:10.1063/1.4972157

Cited by 2 publications

(2 citation statements)

References 6 publications

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“…The formular of the model is derived by multiplying the stock price by the cumulative standard normal probability distribution function. Besides, plenty of empirical studies have been conducted on the Black-Scholes option pricing model in the developed markets [8][9][10].…”

Section: Introductionmentioning

confidence: 99%

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Chooser Option Pricing of Tesla in Terms of Monte-Carlo Simulations

Li¹,

Liu²

2023

Proceedings of the International Conference on Financial Innovation, FinTech and Information Technology, FFIT 2022, October 28-

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In option trading, how to buy, how much to buy and when to trade all affect the ultimate interests of traders. However, the use of appropriate models and analysis methods can help traders predict the changes in stock prices and make corresponding countermeasures. This paper will rely on the historical stock price data of Tesla, analyze it according to black-Scholes model and Monte-Carlo method, and estimate the possible changes of stock price.

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Section: Introductionmentioning

confidence: 99%

“…Qiu and Mitra have even proposed a new compound option that can provide special risk reduction for highly volatile assets -the American Chooser Option. in their Mathematical Properties of American Chooser Options, they processed and analyzed relevant data accordingly, which all illustrate the utility of the Chooser option [10].…”

Section: Introductionmentioning

confidence: 99%

Chooser Option Pricing of Tesla in Terms of Monte-Carlo Simulations

Li¹,

Liu²

2023

Proceedings of the International Conference on Financial Innovation, FinTech and Information Technology, FFIT 2022, October 28-

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Stochastic pricing formulation for hybrid equity warrants

Roslan¹,

Karim²,

Ibrahim³

et al. 2021

MATH

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<abstract> <p>A warrant is a financial agreement that gives the right but not the responsibility, to buy or sell a security at a specific price prior to expiration. Many researchers inadvertently utilize call option pricing models to price equity warrants, such as the Black Scholes model which had been found to hold many shortcomings. This paper investigates the pricing of equity warrants under a hybrid model of Heston stochastic volatility together with stochastic interest rates from Cox-Ingersoll-Ross model. This work contributes to exploration of the combined effects of stochastic volatility and stochastic interest rates on pricing equity warrants which fills the gap in the current literature. Analytical pricing formulas for hybrid equity warrants are firstly derived using partial differential equation approaches. Further, to implement the pricing formula to realistic contexts, a calibration procedure is performed using local optimization method to estimate all parameters involved. We then conducted an empirical application of our pricing formula, the Black Scholes model, and the Noreen Wolfson model against the real market data. The comparison between these models is presented along with the investigation of the models' accuracy using statistical error measurements. The outcomes revealed that our proposed model gives the best performance which highlights the crucial elements of both stochastic volatility and stochastic interest rates in valuation of equity warrants. We also examine the warrants' moneyness and found that 96.875% of the warrants are in-the-money which gives positive returns to investors. Thus, it is beneficial for warrant holders concerned in purchasing warrants to elect the best warrant with the most profitable and more benefits at a future date.</p> </abstract>

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A review on Black-Scholes model in pricing warrants in Bursa Malaysia

Cited by 2 publications

References 6 publications

Chooser Option Pricing of Tesla in Terms of Monte-Carlo Simulations

Chooser Option Pricing of Tesla in Terms of Monte-Carlo Simulations

Stochastic pricing formulation for hybrid equity warrants

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