Stock option warrant analysis

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Authors
Fitch, David Atwood
Subjects
Warrant
Stock market
Option
Advisors
Carrick, Paul M.
Date of Issue
1973-09
Date
September 1973
Publisher
Monterey, California. Naval Postgraduate School
Language
en_US
Abstract
The following is an analysis of stock option warrants from the investor point of view. A survey of the literature presents the forms of analysis used to date. A model is call the Fitch model, for reasons of humility, which will explain warrant value in terms of associated stock variability, yield, leverage, and potential common stock dilution. Time to expiration of the warrant is discounted by considering only warrants with more that seven years until expiration. The analysis also presents two other models, Kassouf's and a linear regression, as a basis for comparison. The conclusions are that the Kassouf model is both heteroscedastic and first order autocorrelated and could not support other analysis without modifying its structure. Of the two remaining models the linear model yields superior predictions as measured by its standard error. It is also felt that a more representative sample of warrants may significantly change the results given here.
Type
Thesis
Description
Series/Report No
Department
Operations Research and Administrative Sciences
Organization
Naval Postgraduate School (U.S.)
Identifiers
NPS Report Number
Sponsors
Funder
Format
Citation
Distribution Statement
Approved for public release; distribution is unlimited.
Rights
This publication is a work of the U.S. Government as defined in Title 17, United States Code, Section 101. Copyright protection is not available for this work in the United States.
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