An Empirical Analysis Of The Listed Companies In China Warrants Prices Errors

Warrant products appeared mach later in Chinese stock market. As a new method of high—leverage investment, it caters for some risk-preferred investors, and also enriches exchange strategies, and makes financing ways more efficient. However, Warrant the market price and the theoretical price is always a larger deviation in Chinese. Therefore, it is necessary to research the deviation of warrants market prices and theoretical price of option in China’s companies. Warrant is a kind of Call Option issued by company in essence, so, it can be priced in all above models.In this paper, we take three European-style warrants as example, based on The Black-Scholes pricing formula, based on this basis, taking into account the dilution effect of warrants. With the correct pricing formula and after the selected parameters to calculate the theoretical price of warrants, and comparative analysis of their actual prices found China’s presence warrants generally overestimated the market price. For further analysis, this bias on the price of the Warrants and the underlying stock price cointegration between time series to analyze the relationship, and the establishment of the error correction model to describe the relationship between short-term fluctuations between them. The main reason is the deviation from the lack of short sale strategy, leading to poor access to arbitrage. Original model the behavior of investors is to have an impact on the price of warrants, and warrants of supply, the system is not sound policy, and investors is limited, which is the directly lead to irrational behavior of investors. The introduction of the warrant the creation system should help to increase supply and curd speculation, but empirical studies have shown that the creation of warrants are higher than the average deviation from the not be created. On the contrary, the creation of mechanisms to make some securities companies to take the initiative to create and cancel warrants, it can profit from this.This study will help the involved departments to help investor correct unscientific warrant investment, and proved the development of China’s current warrants market is healthy. Finally, give some suggestion about the development of China’s warrants market and investors.