World Scientific Center, Center for PBBEF Research
This paper documents the general market situations, the regulations, and the issuing strategies as well as hedging strategies in the recently established Taiwan warrant market. Regulations highly affected the development of the market including the issuers' qualifications, the liquidity requirement of the underlying stocks, the large minimum issuance size, the extended issuing period, and the rules determining the initial premium. Issuers, facing some unrealistic regulations, not only bear substantial issuing risk, but also sustain greater issuance and hedging costs. Security houses therefore become more conservative to further issuance. A modification of current regulations may resolve most of the difficulties and enhance the liquidity of the market.
Review of pacific basin financial markets and policies 3(1), pp.87-105