Study On Risk Monitoring And Control System Of Warrants

There used to be warrants in China securities market during the last decade of twentieth century. However, the warrants trade was ceased in 1996 because of several unpleasant reasons. After about 10 years, warrants was brought in again by majority shareholders of Bao-Steel Group as a mean of compensation for minority shareholders and listed in Shanghai Securities Exchange on August 22, 2005.The emergence of warrants in China securities market, is playing an important role in stimulating the Share-holding Reform, richen financial instruments, strengthen the ability of risk-control of securities firms, perfect price-discovery function of China securities market and so forth. However, we still have many strong reasons for worrying about its imperfect risk-monitoring system, which results in unexpected outcomes. As a fundamental financial derivatives, warrants does have risks itself when being used as a tool of risk-control. If market participants are not well aware of these risks, they would take irrational actions when deal with others in warrants market, which will bring about significant volatility and speculations to the market. What's more, during the operation of warrants, it has different kinds of risks in different periods before it expires, which means different measures should supervisors take to control its risks.Looking into this reality, this thesis firstly analyzes relevant risks of warrants in each period including issuing, listing, trading and exercising, and finds out the key points of risk monitoring accordingly. Then, taking Hong Kong warrants market as an example of standardized and perfect market, the thesis summarizes its successful experience and practice, as well as shortcomings of its risk monitoring system. Following this, this thesis looks back to mainland warrants market in last century, discusses its irrational operation and sinks for reasons of fail. Taking Bao-Steel Call Warrants as an example, the thesis makes empirical research about the operation of new warrants market which was open in August of 2005, finds out the weak points in its risk monitoring and control system. Based on the above study, the thesis integrates successful experience of Hong Kong warrants market into the status-quo of mainland market and makes some implications and suggestions in perfecting risk monitoring and control system of China securities market.