DEFINITION

WARRANT CALL OPTION

issued and guaranteed by the options are exchange instruments

company and are not issued by the
company.

the lifetime of a warrant is often lifetime of a typical option is

measured in years measured in months.
 FEATURES

Exercise Price (EP)

• The stated price on warrant which is the amount an investor
must pay to purchase the specific number of shares.
• May be either fixed(can exercise any time before maturity
date) or variable(exercise price will be periodically increase
till the warrant expires)

Expiration Date
• The day when the warrants are no longer having the
privilege of buying common stock at specified price.
 Valuation of Warrants

Theoretical Price (TP):

TP = ( MP – EP ) x ER

Where TP = Theoretical price

MP = Market Price of the share
EP = Exercise Price of the warrant
ER = Exercise Ratio
 Valuation of Warrants

Warrant or Speculation Premium:

= Market value of the warrant - TP

 Factors of warrants Size
• The higher the stock price, the greater the
Stock price warrants value

• The lower the exercise price, the greater the

Exercise price warrants value

Length of time • The longer the duration to expiration, the greater

duration to expiration the warrant value

Volatility of the • The more volatile the share, the higher the
underlying shares premium

Prevailing Malaysia • High interest rate cause speculative premium to

Interest rates rise