Warrants - An Introduction

From its humble beginnings in the 1980s, when the market developed out of the need for Japanese corporations with relatively poor credit ratings to raise cheap debt, the warrant market has continued to thrive up to the present day. It has changed beyond recognition and now represents an important source of funding for a variety of borrowers, in addition to being a highly lucrative investment market for many fund managers. The market is noted for its ability to develop new and innovative features, as it strives meet the requirements of diverse groups of investors around the world.


In this course, you will learn about the different types of warrants. You'll also learn about how warrants compare with other similar types of securities.


    On completion of this course, you will be able to:

    Define a warrant and calculate its leverage

    Describe a traditional warrant and understand the advantages and disadvantages of warrants for issuers and investors

    Describe the different types of covered warrant

    Explain how warrants compare to and differ from other derivatives


    Topic 1: Warrants Terminology

    What is a Warrant?

    Development of the Warrants Market

    Warrants and Leverage

    o Leverage

    o Delta

    o Gearing

    o Change in Warrant Price

    American and European Style Warrants

    o American Warrants

    o European Warrants

    Topic 2: Traditional Warrants

    What is a Traditional Warrant?

    o Origination of Traditional Warrants

    o Detaching Warrants

    Example of Traditional Warrant

    Benefits of Traditional Warrants for Issuers

    o Coupon

    o Premium

    o No Dividends

    o Flexibility

    o Detachability

    Drawbacks of Traditional Warrants for Issuers

    o Anonymity

    o Expensive Debt

    o Dilution

    Benefits of Traditional Warrants for Investors

    o Leverage and Gearing

    o Long life

    o Cash Extraction

    Drawbacks of Traditional Warrants for Investors

    o Leverage

    o Coupons

    o Voting Rights

    Topic 3: Warrants, Convertible Bonds and Options

    How Warrants are Similar to Convertible Bonds

    How Warrants and Convertible Bonds Differ

    How Warrants are Similar to Options

    How Warrants and Options Differ

    Topic 4: Covered Warrants

    Basic Warrants

    o Definition of Covered Warrants

    o Development of the Covered Warrants Market

    o Vanilla Warrants

    o Index Warrants

    Exotic Warrants

    o Range Warrants

    o Barier Warrants

    o Corridor Warrants

    o Trigger Warrants

    o Turbo Warrants

    o Basket and Spread Warrants



    90 Minutes

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