Twofish's Blog

August 24, 2006

This is going to be a *FUN* paper to write

Filed under: china, quantitative finance, quantlib — twofish @ 2:13 am

http://www.cs.com.cn/sylm/04/t20060824_983387.htm

Baosteel warrants drop 80.0% in one day. This is one week before they expire. Cool.

I probably will have something in time for the Darden Conference on Emerging Markets

I’ll have to keep an eye on this page
http://finance.sina.com.cn/focus/bgqzdc/index.shtml

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2 Comments »

  1. I’ve played the warrants market in sweden for about two years and it seems that most people regard warrants as lottery tickets (speculators, risk seekers) and don’t use the instruments for dealing with risk (hedgers, risk aversive). Perhaps thats why they just sell them off suddenly (explains the huge drop 80% in one day), they roughly do the math and knows intuitively that the warrant will not close In the Money and thus they cash in on the small time value that is left.

    What’s the open interest of the above china warrant?

    Comment by sigma — August 24, 2006 @ 10:02 am

  2. I’m not sure what the open interest is, but I’ll need to track down all of these statistics to do a good paper.

    What is interesting about the Shanghai warrant market is that in contrast to other markets, there are no option contracts outside the warrants, and until 8/1, there was no margining of stock. Also in the case of Baosteel, warrants were issued in lieu of a stock split when the liquid and non-liquid shares were unified about a year ago. What I’d like to see was whether issuing the warrants was a good deal for the company or not.

    Comment by twofish — August 24, 2006 @ 4:24 pm


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