Category: Money Tips Date: 2007-05-18
As with the highly leveraged nature of warrants, investors can take advantage of this feature to adjust their portfolio, so that combination of a more rational and consistent with their risk-return requirements.
1, hedge equity investment risk. Suppose an investor's portfolio holds 1,000 shares of P stock. The recent negative factor for the stock, which investors consider to avoid the risks of short-term decline, he can choose the appropriate duration of the unit put warrant, because the Put Warrant profitable when the stock fell. Profits which can compensate for the loss resulting from the stock down. Because of the highly leveraged nature of warrants, making a put warrant from the access to this part of the proceeds of the capital input will be small, the risk is also can be set. Here we can determine the input by calculating the amount of money put and purchasing cards put the number of permits.
Assumptions: P stocks with the subject of the put warrant: 3.8 yuan,
Line of the right ratio: 1:1
Hedge coefficient: -0.32 (Put Warrant hedge ratio is negative)
The investors purchased the portfolio Put the number of permits for the 1000 ÷ 0.32 = 3125 copies of Put Warrant.
If the P shares closed down 1 yuan, then the stock portfolio P will bring about 1000 × 1 = 1000 million of losses, but the put warrants held by the profit is 3125 × (-0.32) × (-1.00) = 1,000 yuan, 1,000 yuan profit that will be able to compensate for the portfolio P has brought the stock down 1,000 yuan in losses, thereby safeguarding the stability of the portfolio returns.
2, the size of the assets of portfolio management: We already know that the C of E is a standard of financial derivative products. Investors according to their different risk preferences, by choosing different types of warrants and bonds, stocks and other varieties of combinations can be designed to suit their specific needs on their own portfolio of assets.
Suppose an investor may invest funds held by one million yuan on the stock to determine the future of the stock market is not very much and hope to do a bit more conservative to assume the maximum loss is 10%, in this based on the pursuit of higher returns, investment period of six months. The current market there is a six-month period on the bonds, the yield to maturity 4%; the same time, there is a P stock warrants Y, exercise price 10 yuan price of 0.68 yuan warrants a period of six months, P the stock price is 10 yuan. According to this investor risk appetite, you can consider the following two combinations: (1) Investment securities: M million; (2) Investment P stock warrants Y: N million.
Portfolio constructed as follows:
Some bonds are fixed income security at the end of its earnings can be predicted. The largest amount of portfolio losses due to 100 × 10% = 10 million, then the bond portion of the end of the basic insurance benefits for 900,000 yuan. This inverse bond funds invested amount Q:
Q × (1 +4% ÷ 2) = 90 million, to calculate Q = 88.24 million, or invested capital of 882,000 yuan bonds.
Available funds be invested in warrants for the 100-88.2 = 117.6 thousand.
Above-mentioned program of investment may have two different results:
(1) Final results of a: P shares rose 12 yuan
Part of the value of the assets to invest in bonds = 88.24 × (1 +4% ÷ 2) = 90 Wan Yuan
Y part of the investment warrants the value of assets = 11.2 ÷ 0.68 × (12-10) = 32.94 Wanyuan
Ending total assets = 90 +32.94 = 1.2294 million yuan
Rate of return = (122.94-100) / 100 = 22.94%
Discount annual rate of return: 45.88%
The actual trading price of the warrants may be exercisable at a price higher than the expiration of profit might be better.
Shows that if the design meets the market, the operation of effective, warrants in the asset portfolio of the contribution rate of return (the actual trading price of the warrants may be exercisable at a price higher than the expiration), profits may be better. Is quite considerable.
(2) The end result of two: P shares drop to 10 yuan
Part of the value of the assets to invest in bonds = 88.24 × (1 +4% ÷ 2) = 90 Wan Yuan
Y part of the investment warrants the value of assets = 11.2 ÷ 0.68 × 0 = 0
Ending total assets = 90 +0 = 900,000 yuan
Maximum loss: (90-100) / 100 =- 10%
From the above two cases can be seen, investors in the investment portfolio, you can take full advantage of the highly leveraged warrants to construct their own portfolios, so that a higher expected return on investment, while the risk is controlled within the target range .
