Title :
Pricing stock options in mergers and acquisitions with jump-diffusion model
Author :
Lu, Chaoxiao ; Yau, Stephen
Author_Institution :
Dept. of Math., Univ. of Illinois at Chicago, Chicago, IL
Abstract :
We develop a jump-diffusion model to price options on the stocks involved in mergers and acquisitions. The test results indicate that our model performs well in explaining observed option prices. The model can be used by risk arbitrageurs to control risks associated with merger deals using options.
Keywords :
corporate acquisitions; pricing; risk management; share prices; jump-diffusion model; merger deals; mergers and acquisitions; observed option prices; pricing stock options; Brownian motion; Chaos; Corporate acquisitions; Electric breakdown; Filtration; IEEE news; Performance evaluation; Pricing; Random variables; Testing; jump diffusion; mergers and acquisitions; option pricing; risk arbitrage;
Conference_Titel :
American Control Conference, 2008
Conference_Location :
Seattle, WA
Print_ISBN :
978-1-4244-2078-0
Electronic_ISBN :
0743-1619
DOI :
10.1109/ACC.2008.4586623
