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The paradoxical prices of options

Marcato, G. ORCID: https://orcid.org/0000-0002-6266-4676 and Sebehela, T. (2022) The paradoxical prices of options. Review of Pacific Basin Financial Markets and Policies, 25 (2). ISSN 1793-6705

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To link to this item DOI: 10.1142/S0219091522500096

Abstract/Summary

The synchronised relationship between financial and fundamental prices has been topical for years now. It seems that option pricing theory (OPT) has not be used to disentangle that relationship between two prices during merger and acquisition (M&A) activities. This article uses Put-Call parity theorem to explore the divergence of financial and fundamental prices in any firm during acquisition process. The results illustrate that price differentials are persistent; moreover, the differentials are caused by the exponential factor. Despite the fact that some principles are drawn from the REIT literature, the results have wider implications for industries with similar traits to REITs.

Item Type:Article
Refereed:Yes
Divisions:Henley Business School > Real Estate and Planning
Henley Business School > ICMA Centre
ID Code:104912
Publisher:World Scientific Publishing

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