Analysis On The Application Of Barrier Options In China Warrants Market

Warrant, a financial derivative, is inevitable outcome with the development of securities markets. China has launched the warrants in June 1992,but ended it because of speculation in June 1996 .Warrants appeared once again for the share reform in August 2005, 9 years later, however, with the completion of the share reform, warrants market deserted once again , ChangHong CWB1 is the only child in warrants market in 2011.The domestic warrants market is still in the early stage, it still has many areas to be improved, such as trading rules, the regulation of warrants issuance and listing, risk prevention and inhibition of speculation. The barrier option is flexible to knock-out or knock-in by barrier price and has advantages in the inhibition of speculation, low-cost hedging, active market trading .It's significant to research the application of barrier options in the warrants market.Firstly,this paper describes theory of option and barrier options'pricing model , investigates the status of domestic and foreign warrants markets, as well as the problems of domestic warrants market, and then discuss the single-barrier options of Baosteel JTB1, Southern JTP1 and double-barrier options of Shanghai Field JTP1 combine with barrier option pricing model theory, we find the barrier options have obvious advantages in the inhibition of low-cost hedging and speculation by comparison.Finally, we give the development suggestions of the domestic security market; learn from the experience of the development of the Hong Kong warrants market.