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]]>There are many ways to skin a cat

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]]>Could possibly compensate for relative illiquidity of market making if compared to SWs issued by MQ. Cheers.

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]]>That is the recommended regression approach (i.e removal of non-statistical significant variable and re-run of the regression). My intention was to look at the options valuation from a broad framework & regression analysis instead of using BS or other appropriate methods. Further refinements are definitely required. Cheers.

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]]>In your Regression on Structured Call Warrants, if you find that the Exercise Ratio is insignificant, should you not take it out and recalculate a new set of coefficients before calculating your Predicted Premium?

Instead of:

Predicted Premium = 0.000145729*DaysToExpiry – 0.0000376915*ExerciseRatio + 0.000567001*Strike – 0.920459

Should it not be:

Predicted Premium = a*DaysToExpiry + b*Strike + c

whereby a, b, c are the coefficients of a new regression without the ExerciseRatio variable.

CIMB’s structured warrants can have lower implied volatility compared to other issuers. It is possible that CIMB has lower cost of business, due to economies of scale and cheaper cost of borrowing the required capital.

This is reflected in the lower interest rate [r] variable in the Black-Scholes-Merton option pricing model. Yes, [r] can be used to represent the issuer’s cost of “manufacturing” the structured warrants.

]]>Have you noticed that CIMB tends to sell and buyback their structured warrants at a lower implied volatility compared to the other issuers for the same underlying mother shares?

It has implications.

]]>Thanks…

]]>FYI – http://www.investopedia.com/terms/c/capitalization_of_earnings.asp

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