Document evidencing the right, but not the obligation, to buy (call option) or sell (put option) a certain quantity of an underlying asset (goods, securities). The difference to an option is that the exchange is at most a trading platform, but not a counterparty. As a rule, the issuer (the bank) collects the option premium and the purchaser receives the warrant in his securities account. In contrast to an option, warrants have a longer term of up to ten years (the right but not the obligation to buy or sell a certain quantity of an underlying instrument at an agreed-upon price. The right to buy the underlying instrument is referred to as a call warrant; the right to sell it is known as a put warrant. In this way a warrant is very similar to an option. But the length of time available to exercise a warrant is much longer than in the case of option contracts. Most warrants have 5 to 10 years before they must be exercised or expire worthless). Warrants can only be bought, but not sold short. – A distinction is made primarily between – naked warrants, which are issued by the issuer as call or put warrants, and – covered warrants, where the issuer holds the underlying asset in its own possession. In addition to ordinary warrants (plain vanilla warrants), a number of special designs can also be found, such as those based on the volatility of the underlying. Because warrants are derivatives, the institutions selling them have special information obligations towards their customers. – Warrants are frequently issued by companies in connection with a bond. In this case, they represent the right to purchase shares of the company according to certain conditions (often warrants are issued in combination with a bond and represent the right to purchase shares of the company issuing the bond. Warrants are given out in this way as a sweetener to make the bond issue more attractive, and to reduce the interest rate that must be offered in the case of selling a bond issue). – See markdown, derivatives transactions clearing obligation, derivatives transactions reporting obligation, derivatives regulation, counterparty, central, warrant, exempting, sleepy warrant, tubos, warrant.
Attention: The financial encyclopedia is protected by copyright and may only be used for private purposes without express consent!
University Professor Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec.
Professor Dr. Eckehard Krah, Dipl.rer.pol.
E-mail address: info@ekrah.com
https://de.wikipedia.org/wiki/Gerhard_Ernst_Merk
https://www.jung-stilling-gesellschaft.de/merk/
https://www.gerhardmerk.de/