Category: Money Tips Date: 2007-02-20
The main factors that determine the value of warrants are: the underlying asset price, the underlying asset price volatility, time warrants and the exercise price, the market interest rates and cash dividends and so on.
(1) the underlying asset prices: Since the warrants are based on underlying assets arising from derivative products, the underlying asset prices, thus becomes one of determining the issue price and the transactions warrants the most important factor in price movements. The higher the price of underlying assets, which means the subscription (put) warrants the implementation of the C of E holders of the proceeds from the bigger (small). Therefore, the higher the subscription price of the underlying asset (put) warrants its issuance or transaction prices are often higher (lower).
(2) The warrant exercise price: the price of underlying assets the contrary, the warrant exercise price agreed upon by the higher subscription (put) warrants its issuance or transaction prices are often lower (high).
(3) The validity of warrants: Warrants longer valid, the higher the time value of warrants, the warrants issue price or trading in general, the higher the price.
(4) the underlying asset price volatility: the underlying asset price volatility, the greater the underlying asset prices abnormally high (low) the greater the likelihood, then the warrant at the price of the opportunities within the more, so the issue price or trading warrants in general, the higher the price.
(5) risk-free rate: risk-free interest rate is determined by the size of the underlying assets, the cost of investment. The higher the risk-free rate to invest in higher cost of underlying assets and therefore warrants become more attractive, while the attractiveness of put warrants a corresponding smaller, so the subscription (put) warrants the issuance or transaction price will The higher (lower).
(6) Expected dividend: Interim Measures of China's C of E provided that the target dividend will adjust the exercise price of, adjusting the formula is: the new exercise price = the original exercise price × (the underlying stock goes ex-dividend price / underlying shares closed the day before ex-dividend price).
