Why Are Derivative Warrants More Expensive Than Options? An Empirical Study

摘要

Derivative warrants typically have prices that are higher than the prices of otherwise identical options. Using data from the Hong Kong market during 2002-2006, we show that the price difference rerects the liquidity premium of derivative warrants over options. Newly issued derivative warrants are much more liquid than are options with similar terms. As a result, long-term derivative warrants are preferred by traders who trade frequently. In spite of their higher prices, short-term returns on long-term derivative warrants are, in fact, slightly higher than the hypothetical short-term returns on options. On the other hand, derivative warrants near their expiration are less liquid, more thinly traded, and no more expensive than options with similar terms.