Research On The Warrant Risk Measurement Basing On The Black-scholes Pricing Model

Chinese financial markets, characterized by multi-lever medium of exchange, diversity varieties and trade mechanisms, is formed by money markets, bond markets, stock markets, gold markets and futures markets after the development for years. The advanced financial products, the market structure, the technology and management expertise are more advanced or mature than ever before. Warrant, which is good for perfecting the structure of the stock market, melting financial risks, raising the financing efficiency of equity financing, is an important financial measure in the reform of the banking system. And warrant products play a positive role in state stock reduction and incentive shares. Because of the great financial risk associated with warrant, we should not only tell investors the huge risk accompanying with high rewards but also analyse it scientifically and discuss it reasonably. The intrinsic value and risk have significant impacts on investment strategy. In this paper, it first gives a primary expatiation on warrant, then introduces the Black-Scholes models of warrant pricing. On this basis, it researches the warrant risk measurement of pricing models basing on the Black-Scholes. VaR's application in warrant risk measurement is researched in this paper. Because of the high potential risk of warrants, it calculates the VaR with one-day-holder, uniting of primary foundation, taking the logarithms of rate of return as normal distribution, using the nonparametric approach determining quantile, and calculating VaR with matlab. Contrasting the numerical result with the actual rate of return we find that VaR covers the warrant risk effectively and posses high reference value. But VaR underestimates the volatility of individual warrant risk. At last the conclusion that investors must consider VaR, warrant's rate of reture and overflow comprehensive is obtained.