Pricing Call Warrant by Using Trinomial Model and Historical Volatility

  • Wan Mohd Yaseer Mohd AbdohEmail author
  • Khairu Azlan Abd Aziz
  • Wan Suhana Wan Daud
  • Noorsyiha Mustafa
Conference paper


Warrant is one of the financial instruments providing assistance to investors as a security hedging that authorizes the holder in buying or selling underlying stock of the issuing company at a certain amount, price, and time. Trading warrant is a risky investment since the company must know the appropriate price, while the broker equally needs to have knowledge about warrant due to the price, which tends to be undervalued or overvalued during the pricing process. In this study, the trinomial model is adopted as an extension of the binomial model. The objective of this research is to study trinomial model and historical volatility in pricing call warrant and compare the warrant model price with the actual price. The relative pricing error is calculated for valuation of the warrant price, and moneyness is calculated to identify whether the price is reasonable for investors to buy the underlying shares.


Call warrant Trinomial model Historical volatility Price 


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Copyright information

© Springer Nature Singapore Pte Ltd. 2019

Authors and Affiliations

  • Wan Mohd Yaseer Mohd Abdoh
    • 1
    Email author
  • Khairu Azlan Abd Aziz
    • 2
  • Wan Suhana Wan Daud
    • 3
  • Noorsyiha Mustafa
    • 2
  1. 1.Department of FinanceUniversiti Teknologi MARA Cawangan PerlisArauMalaysia
  2. 2.Department of Mathematical Sciences and StatisticsUniversiti Teknologi MARA Cawangan PerlisArauMalaysia
  3. 3.Institute of Mathematics EngineeringUniversiti Malaysia PerlisPerlisMalaysia

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