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Conference Paper: Is Warrant Really a Derivative? Evidence from the Chinese Warrant Market

TitleIs Warrant Really a Derivative? Evidence from the Chinese Warrant Market
Authors
Issue Date2011
Citation
HKU-HKUST-Stanford Conference in Quantitative Finance, Hong Kong University of Science and Technology and Hong Kong University, Hong Kong, 9-10 December 2011 How to Cite?
AbstractThis paper first studies the Chinese warrant market that has been developing since August 2005. Empirical evidence shows that the market prices of warrants are much higher systematically than the Black-Scholes prices with historical volatility. The prices of a warrant and its underlying asset do not support the monotonicity, perfect correlation and option redundancy properties. The cumulated delta-hedged gains for almost all expired warrants are negative. The negative gains are mainly driven by the volatility risk, and the trading values of the warrants for puts and the market risk for calls. The investors are trading some other risks in addition to the underlying risk. This is a joint work with Eric C. Chang and Lei Shi.
Persistent Identifierhttp://hdl.handle.net/10722/145625

 

DC FieldValueLanguage
dc.contributor.authorZhang, Jen_US
dc.contributor.authorChang, ECen_US
dc.contributor.authorShi, Len_US
dc.date.accessioned2012-02-28T01:59:00Z-
dc.date.available2012-02-28T01:59:00Z-
dc.date.issued2011en_US
dc.identifier.citationHKU-HKUST-Stanford Conference in Quantitative Finance, Hong Kong University of Science and Technology and Hong Kong University, Hong Kong, 9-10 December 2011en_US
dc.identifier.urihttp://hdl.handle.net/10722/145625-
dc.description.abstractThis paper first studies the Chinese warrant market that has been developing since August 2005. Empirical evidence shows that the market prices of warrants are much higher systematically than the Black-Scholes prices with historical volatility. The prices of a warrant and its underlying asset do not support the monotonicity, perfect correlation and option redundancy properties. The cumulated delta-hedged gains for almost all expired warrants are negative. The negative gains are mainly driven by the volatility risk, and the trading values of the warrants for puts and the market risk for calls. The investors are trading some other risks in addition to the underlying risk. This is a joint work with Eric C. Chang and Lei Shi.-
dc.languageengen_US
dc.relation.ispartofHKU-HKUST-Stanford Conference in Quantitative Financeen_US
dc.titleIs Warrant Really a Derivative? Evidence from the Chinese Warrant Marketen_US
dc.typeConference_Paperen_US
dc.identifier.emailZhang, J: jinzhang@hku.hken_US
dc.identifier.emailChang, EC: ecchang@business.hku.hken_US
dc.identifier.authorityZhang, J=rp01125en_US
dc.identifier.authorityChang, EC=rp01050en_US
dc.identifier.hkuros198766en_US
dc.publisher.placeHong Kong-
dc.description.otherHKU-HKUST-Stanford Conference in Quantitative Finance, Hong Kong University of Science and Technology and Hong Kong University, Hong Kong, 9-10 December 2011-

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