Equity‐Linked Cross‐Currency International Financial Instruments: A Study of the Pricing of Euro‐Warrants

Although the Eurobond market has been reasonably welldeveloped for almost two decades, only recently has there been a proliferation of equity‐linked Eurobonds, as issuers have attempted to respond to historically high Eurobond interest rates and the opportunities to reduce the nominal yield of issues by providing for conversion of the bond or by attaching warrants for purchase of the stock of the issuer. From 1979 to 1983, some twenty‐three corporate issuers have attached warrants for stock purchase to Eurobond issues which were denominated in a currency different from that of the jurisdictional headquarters of the parent; twenty‐one issues were denominated in dollars, one (Jusco) in German marks, and one (Schering AG) in sterling. By nationality, nine issues were made by German firms, all of which are industrial leaders or major banks; seven issuers were Japanese; three, British; two, Swiss (both banks); and two Canadian (both Seagrams Co.).