SPAC to Basics: A Monte Carlo Approach to Valuing De-SPAC Warrants with Path-Dependent Redemption Features

The authors introduce a Monte Carlo model to value de-SPAC warrants. These warrants contain path-dependent cumulative Parisian redemption features that are ignored by simpler valuation methods. The authors’ model prices basic de-SPAC warrants accurately, provides an upper bound for more complex warrants, and shows that the cumulative Parisian redemption features often have material impacts on warrant values. The authors offer a detailed description and sample code to implement and extend their procedure.