Thursday, 10 September 2015

Covered Warrants

Covered Warrants are mainly issued by investment banks.

They are issued to offer a leveraged investment tool for investors.

Cash settlement is the norm for Covered Warrants; thus companies will not face any changes in their shareholding structures as a result.

In other words, Covered Warrants will not dilute a company shareholding.

Unlike Company Warrants, Covered Warrants have good liquidity due to the market making system.

Their pricing mechanism is more transparent (statistics such as effective gearing is readily available).

It is possible to track changes in the theoretical prices of Covered Warrants.

Investors should study the relevant information carefully and bear in mind their own risk tolearance in making the decision whether to invest in Covered Warrants.

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