An Analysis of the Covered Warrants listed on the Athens Exchange

Costas Siriopoulos, Zayed University

Document Type

Article

Source of Publication

Journal of Risk & Control

Publication Date

12-30-2014

Abstract

The particular study is the first academic attempt to review a new financial instrument, the covered warrants, which were listed for trading in the Athens Exchange within the framework of the recapitalization of the three systematic Greek banks (Alpha Bank, National Bank of Greece and Piraeus Bank) in the summer of 2013. In particular, we discuss the basic characteristics of these instruments and we examine their pricing efficiency during the fifteen months of their listing. The empirical results suggest that the Greek warrants market is inefficient as the three listed contracts are systematically underpriced compared to their theoretical value based on the historic realized volatility of the underlying shares. Furthermore, a dynamic delta-hedged warrant portfolio yields significant cumulated gains that exceed the risk-free rate.

First Page

13

Last Page

30

Disciplines

Business

Keywords

Warrants, Cox-Ross-Rubinstein model, Greek banks, Implied volatility, Delta hedging

Indexed in Scopus

no

Open Access

yes

Open Access Type

Bronze: This publication is openly available on the publisher’s website but without an open license

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