Warrants Pricing In China's Market

In essence,warrant is an option,thus,the option pricing methods can be used for warrants pricing。However,warrant is a kind of financial derivatives which is somewhat new in China.As an emerging market,comparing to the mature overseas'market,some rules and regulations in our country are unsounded。Therefore,in this paper,considering the condition of different risk-free interest rates and the no short-selling in our market,we discuss the cost of hedging warrant position for the warrant-seller as well as the warrant-buyer,then,by means of the classical Black-Scholes formula,we obtain the no-arbitrage intervals of warrant price。Then,to discuss the upper bound of warrant price,we consider the volatility is stochastic and assume that it follows the model given by Hull-White(1987),by means of historic dates of implied volatility,we forecast the future implied volatility。At last,by contrasting the model price and the market price of warrant,we discuss the forecast ability of different models and analyze the pricing error。The empirical results show that:comparing to the behavior of the underlying stock,warrant price is more affected by speculative factor。Based on the results,we give some proposals for the development of our warrants market。...