An Analysis of the Covered Warrants listed on the Athens Exchange

Siriopoulos, Costas (2015): An Analysis of the Covered Warrants listed on the Athens Exchange. Published in: Journal of Risk & Control , Vol. 1, No. 1 (9 March 2015): pp. 1-18.

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.

• Item Type: MPRA Paper
• Language: English
• Keywords: Warrants, Cox-Ross-Rubinstein model, Greek banks, Implied volatility, Delta hedging
• Subjects: G - Financial Economics > G3 - Corporate Finance and Governance > G32 - Financing Policy ; Financial Risk and Risk Management ; Capital and Ownership Structure ; Value of Firms ; Goodwill

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