Shariah issue of warrant contract: empirical evidence from warrant mispricing in Malaysia market

Qizam, Ibnu and Ardiansyah, Misnen and Haron, Razali (2013) Shariah issue of warrant contract: empirical evidence from warrant mispricing in Malaysia market. Global Review of Islamic Economics and Business, 1 (1). pp. 50-68. ISSN 2338-2619

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Abstract

The objective of this paper is to analyze the “gharar” issue of warrant by presenting the empirical evidence of warrant mispricing in Malaysia's market (moneyness and mispricing) and its determinant. The Black Scholes Option Pricing Model (BSOPM) will be used to detect mispricing in a warrant's contract. In addition panel regression will be performed to analyze the determinant if said warrant is mispriced. The result shows that in majority, mispricing happens in warrant, either by Out the Money, or In the Money. Panel regression analysis finds that Stock price, klibor, and maturity are positive and are significant variables to the mispricing of a warrant. Finally, with the use of a warrant mispricing model, this research concludes that there is gharar issue in warrant contract.

Item Type:	Article (Journal)
Additional Information:	4581/32297
Uncontrolled Keywords:	Gharar, Warrant, BSOPM, Moneyness
Subjects:	H Social Sciences > HG Finance > HG4001 Financial management. Business finance. Corporation finance.
Kulliyyahs/Centres/Divisions/Institutes (Can select more than one option. Press CONTROL button):	Kulliyyah of Economics and Management Sciences > Department of Finance
Depositing User:	Dr. Razali Haron
Date Deposited:	17 Oct 2013 10:18
Last Modified:	17 Oct 2013 10:18
URI:	http://irep.iium.edu.my/id/eprint/32297

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