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 payoff 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 Isenberg School of Management, University of Massachusetts
国际会议
昆明
英文
1-38
2005-07-05（万方平台首次上网日期，不代表论文的发表时间）