The relative performance of four alternative warrant pricing models

摘要

Four warrant pricing models are examined in the paper: a pair based on the BS model, a pair based on the constant elasticity of variance (CEV) modification. Based on daily closing price of Shanghai-Shenzhen warrant market from August 2005 to September 2010, and more than 14000 warrant price observations, the FTCEV model generates the lowest mean absolute pricing error in most of the warrants tested. In many cases, the dilution-adjusted Black-Scholes model remains an economical alternative.