Market Structure and its Effects on the Pricing of Derivative Securities in Australia
Chan, Howard
Pinder, Sean
10.4225/03/5938ad006a31f
https://bridges.monash.edu/articles/journal_contribution/Market_Structure_and_its_Effects_on_the_Pricing_of_Derivative_Securities_in_Australia/5090326
This paper examines whether two securities that have identical payoffs, the equity warrant and the exchange traded option, are priced differently when they are subject to different microstructure issues. The results show that different trading processes, the behaviour of market makers and short-selling restrictions seem to have an effect on relative pricing. This study indicates that, on average, a warrant is priced higher relative to an equivalent option. It appears that this pricing difference may be related to greater liquidity in the warrant market as compared to the option market.
2017-06-08 01:48:47
1959.1/35588
Warrents
1998
Options
monash:6838
Liquidity
Market structure