Empirical Research Of The Creation Of Mechanisms Of Warrant Pricing Efficiency

Full-guaranteed creation institution is an important approach of maintaining the stability of Chinese warrant market. It allows the security traders to freely create and logout warrants which are identical to those being traded on the market. In theory, when there is extra demand and prices are soaring, security traders create warrants, on the contrary, when prices are falling, security traders logout warrants to reduce the supply. This mechanism maintains balance of warrant market and prevents over speculation. We use the method in a report of Shanghai security exchange as reference, divide 24 warrants in Shanghai and Shenzhen market into two groups, and investigate premium rate, daily excessive fluctuation ratio and departure to theoretical price respectively for testifying empirically whether creation system could improve the pricing efficiency. Finally, give theoretical explanation for the result.