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Shanghai Securities Journal United Securities Research Institute Yang Ge
On December 23, 2005, 240 million American put warrants of Baiyun Airport (Airport JTP1 for short)（ information quotation forum ）, code 580998) was listed on the Shanghai Stock Exchange, which is the first American style warrant in the mainland warrant market after the implementation of the share reform.
American warrant means that the holder has the right to buy or sell the underlying at any time before the maturity date negotiable securities , such as Baiyun Airport Put
The exercise period of the warrants shall be any trading day from the first trading day three months after the listing of the warrants to the expiration date of the warrants.
The European style warrant means that the holder has the right to buy or sell the underlying securities only on the agreed maturity date. For example, several European style warrants in the current market can only be exercised on the expiration date of the warrant duration.
The internationally used Black Scholes model can only be used for pricing European warrants due to the limitations of model assumptions. For the pricing of path dependent financial derivatives such as American style warrants, the binary tree model is commonly used internationally.
The binomial tree model assumes that the stock price fluctuation has only two directions, upward and downward, and that the probability and amplitude of each upward (or downward) fluctuation of the stock price remain unchanged throughout the review period. The model divides the duration of the study into several stages, simulates all possible development paths of the positive shares in the entire duration according to the historical volatility of the stock price, and calculates the warrant exercise income and the warrant price calculated by the discount method for each node of each path. For American style warrants, because they can be exercised in advance, the theoretical price of the warrants at each node should be the greater of the warrant exercise income and the discounted warrant price. Since the holders of American style warrants have more opportunities to exercise than those of European style warrants, the theoretical price of American style warrants is higher than that of European style warrants.
The article is purely a personal point of view, for reference only, and is responsible for its own writing. Readers enter the market accordingly, and bear the risk
The author declares that, within the knowledge of the institution and myself, the institution, myself and the property stakeholders have no interest in the securities under evaluation
Sina statement: The content of this article is purely the author's personal view, only for investors' reference, and does not constitute investment advice. Investors operate accordingly at their own risk.
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