Overpriced Derivatives in the EU-Market

The market provides investors with plain vanilla products like options which can be used as an insurance from losses. However, in the OTC market products like warrants can be traded which have very similar features as options. Therefore we would expect that (by no arbitrage arguments) the two products would be worth the same. In the literature though, several papers can be found which confirm that in the Asian market warrants are priced higher than options. We have observed the EU-market for single stock options and warrants. Price differences between the single stock warrants and the corresponding options (i.e. options on the same date with the same underlying, strike and time to maturity as the warrant) in the German market during the time period 2012-2015 was observed. A statistical analysis was performed in order to verify the pricing efficiency of the prices.

Autorentext

Ayrton Sinani has finished his undergraduate studies of Mathematics at the University of Ljubljana. He moved to Germany in order to pursue a graduate degree in Mathematical Finance & Actuarial Science at the Technical University of Munich. Currently he is working as a Quantitative researcher at Credit Suisse in London.