This paper studies the influence on the Japanese stock (cash and futures) markets of the Nikkei put warrants which were traded in Toronto and New York from February 1989 to April 1993. Implied changes in the Japanese prices based on the previous days’ North American warrant prices are compared to the actual price changes. Special attention is placed on the period from January 1990 to August 1992 when the Japanese stock market had a major decline. / Business, Sauder School of / Graduate

Thesis (MBA)--Stellenbosch University, 2002. / ENGLISH ABSTRACT: Increased uncertainty in global markets has compelled modern investment and portfolio management to tailor specific financial outcomes. Investors can incorporate derivative instruments into their portfolios to hedge their positions against uncertainty, obtain exposure to virtually any risk or obtain current exposure for future income. Warrants are such instruments; it tracks its underlying asset as options and are tailored for smaller and private investors. It could, however, also be dangerous to one's financial health if the finer intricacies are not understood. Warrants take the investment industry to a new level, because it is essentially a retail product. Warrant issuers hedge a position in assets or on derivative exchanges at a 'wholesale' price and then short the position in small contracts on the stock exchange at a 'retail' price. The price difference presents itself in the volatility parameter used to calculate the issuing price of the warrant. Once issued, the issuer maintains influence on the price by exerting either supply or demand through maintaining a bid and offer in the market. Often, issuers use this 'market-making' to steer the instrument price towards a lower volatility parameter at the expiry of the warrant when it is neutralised, thus securing profit to the issuer. Traditionally financial institutions would market their services in managing assets. They now flex muscles in marketing a retail product through issuing warrants as well. Fierce competition exists among issuers with low cost and differentiated strategies identifiable. These strategies could persuade an investor towards a particular warrant, which might not necessarily be the best investment from the investor's viewpoint. This erodes the efficiency of the market. / AFRIKAANSE OPSOMMING: Toenemende onsekerheid op wêreldmarkte noodsaak hedendaagse beleggingsbestuur om spesifieke finansiele resultate te verseker. Beleggers kan afgeleide instrumente in portefeuljes gebruik om teen onsekerheid te verskans of blootstelling te verkry. Sekuriteitsregte is 'n populêre instrument vir private beleggers. Dit word uitgereik deur finansiele instellings en volg die pad van 'n onderliggende bate, soos 'n opsie. Vanweë die intrede van 'n middelman, hou hierdie instrumente egter addisionele risiko in. Sekuriteitsregte kan beskryf word as 'n kleinhandelsproduk. Kontrakskrywers neem lang posisies in bates of op die afgeleide beurs in, teen groothandel pryse en verkans kort posisies in klein kontrakte op die sekuriteitsbeurs om sodoende 'n neutrale posisie te handhaaf. Die prysverskil manifisteer as 'n volatiliteits maatstaf van die onderliggende bate. Na uitreiking beïnvloed die onderskrywers die prys deur die vraag en aanbod op die mark te manipileer. Hierdie invloed kan gebruik word om die kontrakprys na 'n laer volatiliteitsvlak te stuur voor die kontrak verstryk, sodat addisionele wins gewin kan word. Finansiële instellings bemark hul dienste tradisioneel as batebestuurders. Hul besigheid word egter nou uitgebrei deur handelsprodukte ook te bemark. Sterk kompetisie bestaan tussen onderskrywers met lae koste of gedifferensieerde strategieë identifiseerbaar. Beleggers se keuses word dikwels deur hierdie strategiese bemarking beïnvloed, eerder as om op finansiele toepaslikheid te fokus. Dit lei tot die gevolgtrekking dat die mark nie volkome voltreffend is nie.

Syfte: Denna studie avser att undersöka vilka som är de huvudsakliga problemen och riskerna med teckningsoptioner för de anställda och företagen, samt eventuella åtgärder för att öka användbarheten.   Teori: Studien utgår från teorier som kopplas till teckningsoptioner. De teorierna som tillämpas är belöningssystem, optionsprogram, optionsteori, Black-Scholes-modellen, företagsvärdering och principal-agent-teori. Metod: Denna studie utgår från ett kvalitativt angreppssätt och den metod som tillämpas är semistrukturerade intervjuer. Åtta personer som har kompetens inom optionsprogram och/- eller använder teckningsoptioner är respondenter i denna studie. Empiri: Samtliga respondenter kunde nämna olika fördelar med teckningsoptioner och majoriteten anser att det är ett bra och flexibelt instrument. Ett flertal problem och risker belystes och det är problem och risker som drabbar den anställde, företaget eller båda parter. För den anställde handlar det framförallt om att optionerna förfaller värdelösa och att det är problematiskt att finansiera köpet. För företaget krävs det mycket administration och kostnader för att utforma optionsprogrammet. Även ett flertal åtgärder för samtliga risker och problem berördes för att kunna öka användbarheten.   Slutsats: Teckningsoptioner är ett lämpligt instrument men det kan medfölja många risker som bör beaktas och medvetenheten om dem bör vara större. Genom att öka medvetenheten om riskerna ökar chanserna för att kunna minimera dem i tid. / Purpose: This study aims to investigate the main problems and risks of stock warrants for employees and companies and potentially the measures that may increase the usability. Theory: The study is based on theories related to stock warrants as incentive scheme: reward system, option theory, Black-Scholes model, company valuation and principal-agent theory. Method: This study will be based on a qualitative approach through eight semi-structured interviews with people who have expertise in stock warrants and/or use stock warrants as incentive schemes.  Empirics: All respondents could mention various advantages of stock warrants and the majority consider it to be a good and flexible tool to use. A number of problems and risks were highlighted, as well as problems and risks that affect the employee, the company or both parts. For the employees, it is primarily about that the stock warrants expire worthless and it is problematic to finance the purchase. The companies require a lot of administration and it involves large costs to design the incentive schemes. The respondents did also mention some measures to increase the usability of incentive schemes.     Conclusion: Stock warrants are a good instrument but it may entail many problems and risks that should be considered, and the awareness of them should be greater. If the awareness of the risks increases, then the bigger the chances gets to minimize them in time.

published_or_final_version / Business Administration / Master / Master of Business Administration