Tang, K., C. Wang——Quantitative Finance: Are Chinese warrants derivatives? Evidence from connections to their underlying stocks
时间:2013-02-22
In this paper, we empirically investigate warrant price behaviour in the Chinese market--the largest warrant market in the world in terms of trading volume since 2006. By examining warrant return properties, volatility behaviour and pricing errors, we document a stylized fact that call warrants have a considerable linkage with their underlying but put warrants have almost none. The combination of the arbitrage pricing theory and the resale-option bubble theory (proposed by Scheinkman and Xiong i