Category: Money Tips Date: 2006-05-31
Investors: What is the exchange ratio?
Lee Kum: exchange ratio is to control the shares of a unit is, or 1 point index number of copies required for Warrant. For example, a nest round of the exchange ratio is 10 versus 1, on behalf of the due date 10 Warrant is exchangeable shares of a stock.
Warrant prices are determined according to different terms, even if the terms are sometimes Warrant close, but the nest round of price will be different. For example, there are two warrants, the exercise price and expiration date are similar, there is no obvious difference in implied volatility, why is the price of a few cents, the other only a few of the price is HK then?
In fact, even the terms of exactly the same as warrants, the price gap may be large, This is due to the different exchange ratio.
Suppose Warrant A and B, its provisions are as follows:
While the above two warrants of face value of a difference of 10 times per round, but the fact that two warrants the price is the same. To Warrant A point of view, the exchange ratio for the 100 dollar one, that is, investors need to buy 100 copies of warrants before they can share control of a unit is, in other words, control the cost of a share of 26 Hong Kong dollars (0.26 Hong Kong dollars x 100). In contrast, warrants B point of view, the exchange ratio of 10 versus one, control the cost of a share is 26 Hong Kong dollars (2.6 HK x 10). Therefore, the two warrants the price is the same, only because the exchange ratio is different from the level of difference emerge.
