Valuation of equity warrants for uncertain financial market

TL;DR

This paper introduces a novel approach to valuing equity warrants using uncertainty theory and uncertain calculus, providing a new framework distinct from traditional probability-based methods.

Contribution

It develops a new valuation formula for equity warrants assuming uncertain stock dynamics modeled by uncertain differential equations.

Findings

Derived a pricing formula for equity warrants under uncertain stock models.

Demonstrated the application of uncertain calculus in financial valuation.

Provided a theoretical foundation for warrant valuation in uncertain markets.

Abstract

In this paper, within the framework of uncertainty theory, the valuation of equity warrants is investigated. Different from the methods of probability theory, the equity warrants pricing problem is solved by using the method of uncertain calculus. Based on the assumption that the firm price follows an uncertain differential equation, the equity warrants pricing formula is obtained for uncertain stock model.