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The pricing of High Yield Equity Notes
Author(s) -
Duncan Paul J.,
Easton Stephen A.
Publication year - 2002
Publication title -
accounting and finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.645
H-Index - 49
eISSN - 1467-629X
pISSN - 0810-5391
DOI - 10.1111/1467-629x.00076
Subject(s) - equity (law) , yield (engineering) , cash flow , financial economics , transaction cost , business , database transaction , position (finance) , economics , monetary economics , finance , computer science , political science , law , metallurgy , programming language , materials science
High Yield Equity Notes are securities that provide the noteholder with a cash flow stream that comprises a fixed yield and a short position in a European put option on the shares of an Australian company. This paper examines the pricing of these securities and finds apparent overpricing compared with expectations given standard pricing relationships. This apparent overpricing is consistent with the low transaction costs incurred by purchasers of High Yield Equity Notes.