Search results for "Reduced form"

A Reduced-Form Model for Warrant Valuation

2011

This paper studies warrant valuation using a reduced-form model. Analogous to the credit risk literature, structural models require complete information about the asset value process and the firm’s liabilities. In contrast, reduced-form models require only information about the firm’s stock price process. We introduce a reduced-form model where the warrant holder is a price taker, and we relate our model to structural models appearing in the literature.