The Pricing of Initial Public Offerings: An Option Approach

This chapter proposes a theoretical model of initial public offering by taking into account the uncertainty in security pricing and the underwriting process. Three major factors are shown to affect the IPO pricing: (1) the uncertainty of stock price, (2) the legal requirement that restricts underwri...

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Main Authors:	LIU, Sheen, WU, Chunchi, CHEN, Peter Huaiyu
Format:	text
Language:	English
Published:	Institutional Knowledge at Singapore Management University 2008
Subjects:	Finance and Financial Management Portfolio and Security Analysis
Online Access:	https://ink.library.smu.edu.sg/lkcsb_research/850
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Institution:	Singapore Management University
Language:	English

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spelling	sg-smu-ink.lkcsb_research-18492010-09-23T06:24:04Z The Pricing of Initial Public Offerings: An Option Approach LIU, Sheen WU, Chunchi CHEN, Peter Huaiyu This chapter proposes a theoretical model of initial public offering by taking into account the uncertainty in security pricing and the underwriting process. Three major factors are shown to affect the IPO pricing: (1) the uncertainty of stock price, (2) the legal requirement that restricts underwriters from selling any part of the issue above the fixed offering price, and (3) the underwriters' risk tolerance. It is shown that underpricing is negatively related to the underwriter's risk tolerance, and positively related to the length of premarket period and market price volatility. 2008-01-01T08:00:00Z text https://ink.library.smu.edu.sg/lkcsb_research/850 info:doi/10.1142/9789812791696_0007 Research Collection Lee Kong Chian School Of Business eng Institutional Knowledge at Singapore Management University Finance and Financial Management Portfolio and Security Analysis
institution	Singapore Management University
building	SMU Libraries
continent	Asia
country	Singapore Singapore
content_provider	SMU Libraries
collection	InK@SMU
language	English
topic	Finance and Financial Management Portfolio and Security Analysis
spellingShingle	Finance and Financial Management Portfolio and Security Analysis LIU, Sheen WU, Chunchi CHEN, Peter Huaiyu The Pricing of Initial Public Offerings: An Option Approach
description	This chapter proposes a theoretical model of initial public offering by taking into account the uncertainty in security pricing and the underwriting process. Three major factors are shown to affect the IPO pricing: (1) the uncertainty of stock price, (2) the legal requirement that restricts underwriters from selling any part of the issue above the fixed offering price, and (3) the underwriters' risk tolerance. It is shown that underpricing is negatively related to the underwriter's risk tolerance, and positively related to the length of premarket period and market price volatility.
format	text
author	LIU, Sheen WU, Chunchi CHEN, Peter Huaiyu
author_facet	LIU, Sheen WU, Chunchi CHEN, Peter Huaiyu
author_sort	LIU, Sheen
title	The Pricing of Initial Public Offerings: An Option Approach
title_short	The Pricing of Initial Public Offerings: An Option Approach
title_full	The Pricing of Initial Public Offerings: An Option Approach
title_fullStr	The Pricing of Initial Public Offerings: An Option Approach
title_full_unstemmed	The Pricing of Initial Public Offerings: An Option Approach
title_sort	pricing of initial public offerings: an option approach
publisher	Institutional Knowledge at Singapore Management University
publishDate	2008
url	https://ink.library.smu.edu.sg/lkcsb_research/850
_version_	1770569714665259008

The Pricing of Initial Public Offerings: An Option Approach

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