0000000000273934
AUTHOR
Tobias Linder
showing 2 related works from this author
Sequential Warrant Exercise in Large Trader Economies
2007
It is well known that the sequential (premature) exercise of American-type warrants "may" be advantageous for large warrantholders, even in the absence of regular dividends, because using exercise proceeds to expand the firm's scale increases the riskiness of an equity share. We present sufficient conditions for the non-optimality of sequential exercise implying that for realistic interest rate levels even large warrantholders are better off not to exercise long before maturity. This result, however, does not justify in general the simplifying restriction that warrants or convertible securities are valued as if exercised as a block.
Warrant Exercise and Bond Conversion in Large Trader Economies
2006
It is well known that the sequential (premature) exercise of American-type warrants may be advantageous for large warrantholders, even in the absence of regular dividends, because using exercise proceeds to repurchase stock or to expand the firm's scale increases the riskiness of an equity share. We present an upper bound on this advantage and show that this advantage is negligible for a realistic parameter setting. This result, however, does not justify in general the simplifying restriction that warrants or convertible securities are valued as if exercised as a block. It turns out that the option to exercise only a fraction of the outstanding convertibles at the maturity date (partial exe…