Pricing of Traded Warrants by NIG Model

by Petr GAPKO


JEL classification

  • Portfolio Choice; Investment Decisions
  • Asset Pricing; Trading Volume; Bond Interest Rates
  • Investment Banking; Venture Capital; Brokerage; Ratings and Ratings Agencies


Binomial model, Black-Scholes model, hyperbolic distribution, hyperbolic model, volatility, warrant


In the last two decades a special market with option contracts specialized for retail investors has developed in Europe. Warrant had become the right option contract with corresponding attributes. Substantial part of this work is pointed at possibilities and ways of warrant pricing. A useful innovation is the usage of pricing models based on alternative distributions. In our work, we use class of generalized hyperbolic distributions, which demonstrates good empirical performance in describing stock returns. The problem is that this class of distributions is mathematically rather more demanding but after handling these mathematical difficulties there is a new way opening for describing performance of stock behavior. Pricing is in this work shown on warrants with a ČEZ share as an underlying asset.