Stock Market Flow Warrants Their Pricing

The CSRC put out the notice to start up the experimental unit of the Split Share Structure Reform in the May 2005. Shanghai Stock Exchange and Shenzhen Stock Exchage announced "Temporary Measure of Warrant Management", commenced to emit the warrant in July. Baogang Warrant exchanged in the market in August, so, the warrant returned to the Chinese security market.It has been making great improvement in financial market of China over the past two decades, especially in its capital market. At the same time, there are many unsolvable problems in Chinese financial market comparing to the developed financial market, such as: the disputed financial structure, poor financial products. Then the issue of warrant will promote the Chinese financial innovation.Previous, there are a few kinds of portfolio with warrant characteristics issued in Chinese stock market, unfortunately they all failed in the end, for example matched-stock warrant. Unrealistic pricing and hyper-speculations are the most important reasons that caused the fail, except the influences of laws and policies at that time. Warrant has functions of price-finding and risk-avoiding, meanwhile it is accompanied by high risk, so we have to deal with it in more rational attitude, analyze it objectively and scientifically, then price it realistically, make all efforts to avoid warrant turn into a hyper-speculated market.It has spent more than 100 years in researching the warrant pricing theory in developed western world, a relatively complete theory system has been set up now which is based on hard works of many scholars. In 1973 Black and Scholes developed and set up the warrant pricing equation after discovery of B-S formula, because of its simple formation and relative accuracy, it has been widely used in practices.Since 1995 some scholars have researched the pricing theories on warrant, convertible bond, and matched-stock warrant in domestic, but there are two major...