Warrants

My paper, "Valuing Warrants: Dilution and Down-Round Price Protection", explains how dilution affects warrant valuation, a subtly complex subject. I developed models to accurately capture the effects of of down-round price protection in response to concerns expressed by the SEC. One model combines a lattice and the BSM equation, and the other employs Monte Carlo simulation. 

 

 

The second paper, "Valuing Warrants with Multiple Exercise Prices, and Warrants on Convertible Preferred Stock" is unpublished. It demonstrates how to value warrants with different exercise prices in a Contingent Claims Analysis and illustrates that warrants on preferred stock can be reasonably be valued either inside the capital structure or in a simple BSM equation but that the latter approach requires the use of a preferred specific volatility.

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