Strategic Exercise of European Warrants
We develop a European warrant pricing theory that accounts for other securities in the capital structure of the firm, besides the stock and a warrant. We demonstrate that an individual who owns a European warrant strategically determines his exercise strategy taking into account any transfer of wealth from stockholders to holders of other non-expiring securities. In equilibrium, a warrant-holder reduces the quantity exercised to mitigate any loss of value from existing and new shareholders. However, the extent to which the warrant-holder is successful in doing so is impacted by the concentration of warrant-holding. In the extreme case, in a perfectly competitive equilibrium, competition between warrant-holders reduces the payo on exercise to zero for a range of firm values.
Nikunj Kapadia Gregory Willette
Isenberg School of Management, 121 Presidents Drive, University of Massachusetts, Amherst, MA 01003,
国际会议
西安
英文
2006-07-17（万方平台首次上网日期，不代表论文的发表时间）