The Empirical Study Of Chinese Warrant's Pricing

Compared with the mature western capital market, Chinese capital market has a remarkable characteristic that is Stock Right Separation. It has become a barrier to Chinese capital market development. In order to resolve this problem, warrant was introduced to Chinese capital market. The warrant is especially important, because of its great significance for not only the reduction of state's stake and corporate administration, but also for some financial deriving instruments such as convertible bond and stock option. Warrant has the functions of price-detection and risk-evasion, while it also has great risk of itself. Therefore, warrant should be treated with rational attitude and its real price should be fixed according to scientific analysis.In this paper, firstly we will make a brief introduction of warrant's basic concepts, characteristics, value and functions, a meticulous introduction about Black-Scholes pricing model and the dilution effect of Black-Scholes pricing model. Followed that make a deeply study of our country's warrant research and practice situation, make an analysis of warrant's significances to our country and the main problems exist in our warrant market. At last, select Chinese securities market's 16 warrants that exist until August 31, 2007 as samples, using Black-Scholes pricing model as tool, make an analysis of warrants' pricing basis, get the fitting degree between market prices and the theory prices of warrants, get the trend of market and theory prices, give the effects between two of them, also including the effects and relationship between warrant's price and underlying instrument's price. With a view of these issues, hope to help us to make better understanding of Chinese warrant market development and the pricing situation; understand the influence of warrant to Chinese capital market; provide valuable information to investors and decision-makers.