Warrant pricing model : an empirical study on the valuation models for warrants listed in Thailand

Abstract

This empirical study focwes on examining the relative performance between four wa"ant pric- ing models; Black-Scholes-Merton Model (BS), Galai and Schneller Model (GS), a Dilution Adjusted- BlacJc -Scholes Model (DA.BS), and Square-Root Constant Elasticity of Variance (SRCEV) of Beclrers. Over 8,000 daily wa"ant prices on 14 most actively traded wa"ants in Thailand are employed. We.find that among models, BS model provides the best accuracy. In terms of moneyness and maturity, BS model calculates accurately for out-of-the-money and short-term maturity, while the SRCEV model outperforms for in-the-money and long-term maturity. In terms of volatility, DABS, GS and SRCEV models are better than the BS model.