The Demand Function for Bank-Issued Warrants

  • Rainer Baule University of Hagen
  • Philip Blonski
Keywords: bank-issued options, price sensitivity, retail derivatives, retail investors, warrants


Bank-issued warrants are securitized options which are particularly designed to give smaller individual investors the opportunity to participate in the derivative markets. As banks incorporate potentially different margins on top of the theoretical fair values of the products, investors face the problem of choosing an optimal product. While previous literature has characterized individual investors as “noise traders”, this paper finds that they do act pricesensitively. In particular, we provide evidence that demand decreases with increasing margins, but also show that larger investors still realize lower margins than smaller investors.


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Author Biographies

Rainer Baule, University of Hagen

Rainer Baule is a Professor of Finance at the University of Hagen, Germany

Philip Blonski

Philip Blonski holds a Ph.D. from the University of Hagen and currently works for the Financial Risk Department of Generali Deutschland Holding AG, Cologne, Germany

How to Cite
Baule, R., & Blonski, P. (2015). The Demand Function for Bank-Issued Warrants. Applied Finance Letters, 4(1 & 2), 12-19.
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