Category: Money tips Release Date: 2006-11-22
Wuhan Iron and Steel intends to issue a similar wide-span (strangle) portfolio warrants. Generally wide-span combinations warrant is exercisable at a price higher than the put warrant is exercisable at a price, when the price of the underlying asset price in the two-line power between the two warrants will lose value, portfolio holder The greatest losses. And the Wuhan Iron and Steel's warrants exercise price of the size of the portfolio is just the opposite, in the Wuhan Iron and Steel resume trading after the expiration of stock if the price of the two lines between the right (ie, 2.9 - 3.0 million), two warrants will be exercisable, portfolio returns lock 0.1 million (without regard to back sale clauses). When the expiration of stock in this range, the combination of earnings will be higher.
However, the Wuhan Iron and Steel warrants are American-style warrants, and warrants for equity warrants, and a return to sale terms. They all make the benefits warrant portfolio holders face greater uncertainty. We turn first to put warrants, since it is American-style warrants, obviously can not simply apply the BS model. BS model to value directly, which means American-style put warrants are exercised in advance is unreasonable. The American-style put warrants is usually in the amount of real value (row of the right to income) is large, ahead of the implementation is reasonable. In the real value of the amount is small, the right line is not to directly sell the warrants, in order to obtain greater benefits.由于美式权证比欧式权证有更多的选择?其价值自然要大于欧式权证? American-style warrants the most common pricing model for the binary tree. We share reform program under the Wuhan Iron and Steel announced in the parameters calculated using the model put power, slightly higher than the valuation of BS model.
Let's look at warrants, an equity warrants, there are back on sale clause. However, it is an American warrant, pricing is more complicated because the owner is OK during the existence of the right to consider a return price of 0.2 yuan. At maturity, the Wuhan Iron and Steel Group's holdings of warrants can not come back on sale as long as the stock price above the exercise price, it is likely the right lines, while the circulation of the right of shareholders to consider the line to be spread income is higher than 0.2 yuan to the decision line right or not. We have adopted a modified binomial tree model calculated the value of warrants to subscribe for 0.379 yuan.
If the successful listing of Wuhan Iron and Steel warrant, then the interests of shareholders in circulation will have a significant impact. Wuhan Steel shares posted after the resumption, if the right to jeopardize the interests of shareholders of tradable shares, but this time the value of put warrants will increase the circulation would provide certain compensation to shareholders. According to Wuhan Iron and Steel's share reform program, after the resumption of natural ex-dividend price of 2.93 yuan, assuming fell to 2.7 yuan, while the price of put warrants for 0.454 yuan. Investors may sell the warrants (the right of return is much greater than the line), 0.068 yuan per share, of compensation entitled to compensation, accounting for the loss of 30%. According to our calculations, the initial listing in the warrant, as long as the stock price is higher than 2.2 yuan, investors would not have the right line, because the price of put warrants at this time is higher than the right line of the proceeds. As the line ahead of American Call Warrants the right to receive proceeds not as the proceeds of warrants sold, let alone return to maturity and 0.2 yuan price. Therefore, warrants and will not move ahead right before the due circulation.
It is worth mentioning that the Wuhan Iron and Steel warrants are American-style warrants, the price limit is an immediate line of the right to return, if the price is below this limit, investors will be buying warrants, real-time line of the right to be able to get risk-free returns. The buyer must become involved to warrant the price quickly returned to its value above the lower limit. However, investors can not short-selling warrants, arbitrage mechanism is not perfect, the price of warrants may still deviate from the theoretical value.
