Category: Money tips Release Date: 2006-05-12
CBBC, including the so-called cattle card and Bear cards, very popular abroad, China's Hong Kong market has also recently launched CBBC. Investors can follow the relevant assets (such as stock, index or commodity) of the strength or weakness of the view and make the appropriate investments, win difference.
To equity-linked certificates of cattle, for example, a company's share price 10 yuan, publishers certificate issued cattle exercise price set at 8 yuan, then the issue will be the stock price of 10 yuan by the exercise price of 8 yuan, or 2 yuan. Through the purchase of cattle permits, investors gained the maturity date the price of 8 yuan to buy the stock right.
With warrants is similar to the CBBC has the leverage. Investors need only a relatively small amount of money can be invested to track the price performance of the underlying assets, to those who judge stocks, broader market trends in a more accurate short-term investors are looking for arbitrage opportunities.
CBBC and the warrant biggest difference is that CBBC has a mandatory recovery mechanism. In the period of CBBC, such as listing the relevant asset prices reach a specified level that is contained in document recovery of prices, distribution immediately resume the Chamber of Commerce, CBBC, and the termination of the CBBC is only traded in the market, before setting to designated date is no longer valid. CBBC issuers issued pursuant to recover the price is determined in two categories, one is to recover the exercise price is equal to price, namely, N category CBBC; and those are to recover the price above the exercise price of cattle lowest card or withdraw Bear in the exercise price of licenses, that is R class CBBC.
UBS Hong Kong CBBC distributors of Johnny Yu said CBBC and the warrant of a difference is that CBBC has canceled the characteristics of the contract if the card fell to set the level of cattle (or bear permits to set up the level of the contract), then the contract stops trading, investors will immediately lose all or almost all of the investment.
It is precisely because the presence of recovery mechanisms, as opposed to options, warrants and other derivatives, CBBC relatively simple method of calculating the theoretical value, implied volatility and time value of wear and tear and other factors on the value of the impact of CBBC relatively minor. In general, the value of the spot price and the exercise price is equal to the difference divided by the exchange ratio. If the value of the underlying assets increase in value of cattle certificate will be close to such a general rise in the ratio of the value of the card bears a general decline in the proportion will be close to and so on. (Zhang Biao)
