Warrant Pricing Model with Autocorrelated Underlying Stock Returns
We develop an analytic warrant pricing model with perfect hedging in an inefficient market model where the underlying price variations are autocorrelated. This is accomplished by assuming that the underlying noise in the system is derived by an Ornstein-Uhlenbeck process, rather than from a Wiener process. This model provides a valuable insight into dependence of warrant price on the return autocorrelation. The analytical solution obtained here reduces to the well known Black Scholes option pricing formula for the special case of no autocorrelation in asset returns, and the PerellO and Masoliver model when autocorrelation coefficient is reciprocal of autocorrelation time.
warrant pricing stock return autocorrelation
Jianquan Sun Xiaoxian Ma
School of Finance and Banking, Shandong University of Finance, Jinan, 250014, China
国际会议
北京
英文
317-320
2009-07-24（万方平台首次上网日期，不代表论文的发表时间）