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Empirical Tests of the Pricing of Nikkei Put Warrants

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  • Wei, Jason Z

Abstract

The purpose of this study is to empirically examine the pricing of Nikkei put warrants, which are long-term put options written on the Nikkei 225 index. Using warrants traded on the Toronto Stock Exchange, this study performs various tests on the pricing models proposed by Dravid, Richardson, and Sun, Reiner, and Wei. It is found that the models tend to overprice the warrants. The overpricing, possibly caused by the omission of the credit risk and the Extraordinary Event Clause, is found to be positively related to the degree to which the warrants are in the money, the volatility level, and the trading volume. Copyright 1995 by MIT Press.

Suggested Citation

  • Wei, Jason Z, 1995. "Empirical Tests of the Pricing of Nikkei Put Warrants," The Financial Review, Eastern Finance Association, vol. 30(2), pages 211-241, May.
    • Handle: RePEc:bla:finrev:v:30:y:1995:i:2:p:211-41
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    Cited by:

    1. Jose A. Lopez & Christian Walter, 1997. "Is implied correlation worth calculating? Evidence from foreign exchange options and historical data," Research Paper 9730, Federal Reserve Bank of New York.
    2. José Eduardo Correia & João Duque, 2008. "Dilution and Dividend Effects on the Portuguese Equity Warrants Market," Portuguese Journal of Management Studies, ISEG, Universidade de Lisboa, vol. 0(2), pages 161-192.
    3. Wen-chung Guo & Ying-huei Chen, 2014. "Pricing of put warrants and competition among issuers," Economics Bulletin, AccessEcon, vol. 34(4), pages 2315-2323.
    4. Frans De Roon & Chris Veld, 1996. "An empirical investigation of the factors that determine the pricing of Dutch index warrants," European Financial Management, European Financial Management Association, vol. 2(1), pages 97-112, March.
    5. Ning, Zi “Nancy” & Tucker, Alan L., 2011. "Hedging import commodity prices for BRICS nations," Global Finance Journal, Elsevier, vol. 22(2), pages 182-190.

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