Price Risk and Governance in China's Warrants Market

摘要

The global financial crisis caused by the U.S. submortgage crisis once again tells us that financial derivatives are a kind of "double-edged swords." In this paper, empirical analysis indicates that in China's warrants market the market prices of majority of warrants are significantly deviated from their theoretical prices, and there exists a serious departure from theoretical characteristics in the dynamic rel②ationship between warrants' prices and the subject securities. Obviously, there exist great speculative activities in China's warrants market, with the result of huge price bubbles and investment risks. The article maintains that the great risk in warrants market can mainly be attributed to the nonequality game among rational individual investors, irrational individual investors, warrant creators and warrant distributors. Therefore, from the perspective of risk governance, it is essential for investors to be aware of the risks of warrant investment and for government to reform the issuing and trading system independently.