Warrants give holders the right to purchase shares of common stock from a company at a fixed price for a specified period of time. They are often issued with bonds. There are different types of warrants including those attached to common stock or bonds, debt warrants, and put warrants. Convertible bonds can be exchanged for a fixed number of shares and have characteristics of both debt and equity securities. Call options give the right to purchase shares at a specified price within a set time, while warrants are issued by companies to raise capital.

1. WARRANTS
Warrants are securities that give holders the right,
but not the obligation, to buy share of common
stock directly from a company at fixed price for a
given period of time. Each warrants specifies the
number of share of stock that the holder can buy.
The exercise price and the expiration date.
Warrants are also refers to as equity kickers
because they are usually issued in combination
with privately placed bonds. Sometimes warrants
can be detachable.

2. Types of warrants
•Warrants with Common Stock or Bonds
•Debt Warrants
Allow investors to purchase additional debt
Warranted bond usually has same coupon & maturity as host bond
•Harmless Warrants:
Variant of debt warrants
Warrant not exercisable until host bond becomes callable
If warrants exercised bonds will be called, so no increase in debt

3. Types of warrants
Covered Warrants
Synthetic warrants issued by third party
e.g. Japanese debt warrants: BT issued identical warrants in local
currency for Swiss investors
Put Warrants
Right to sell company’s common stock
Typically used as part of share repo program
e.g. company wants to hedge employee share options
Takes in option premium
Asset Warrants
Based on any asset, e.g. currency, Nikkei 225

4. Features of Warrant
•Expiry date
•Exercise style
•Deliverable or cash settled
•Call or put warrants
•Conversion ratio
•Underlying instrument

5. Convertible Bonds
A convertible bond is a bond that gives the
holder the right to "convert" or exchange the
par amount of the bond for common shares of
the issuer at some fixed ratio during a
particular period. As bonds, they have some
characteristics of fixed income securities.
Their conversion feature also gives them
features of equity securities.

6. Features of convertible Bonds
•Convertible bonds are debt instruments that
can be converted into equity share of the
company at a future date.
•These security has feature of debt and equity.
It pays periodic coupon interest just like any
other debt instrument.
•At the time of redemption of bond the
investor can choose to receive share of the
company instead of cash..

7. Call option
A call option gives the holder the right, but
not the obligation, to purchase shares of a
particular underlying stock at a specified strike
price with in specified period of time.

8. Difference between warrants and
convertibles
• Time Frame
• Conversion
• Further Investment
• Investment Period

9. Difference between call option and
warrants
• Call option are issued by individuals and
warrants are issued by firms
• Each time warrants is exercised, the number
of share outstanding increases. When call
option is exercised, one investor gains and
other loses. The number of share outstanding
remains the same.

10. Difference between call option and
convertibles
• Call option gives the owner right to buy an
asset at a fixed price during a particular time
period. A convertible bond gives the holder
the right to exchange it for a given number of
share of stock at any time up to an including
the maturity date of the bond.