The price of a derivative warrant (i.e. put/call warrant) generally depends on the price of the underlying asset. However, throughout the term of a derivative warrant, its price will be influenced by a number of other factors, including:
(a) the exercise price of the derivative warrant;
(b) the value and volatility of the price of the underlying asset (being a measure of the issuer’s expectation on the fluctuation in the price of the underlying asset over time);
(c) the time remaining to expiry: generally, the longer the remaining life of the derivative warrant, the greater its value;
(d) the interim interest rates and expected dividend payments or other distributions on the underlying asset;
(e) the liquidity of the underlying asset;
(f) the availability of, and demand for, the derivative warrant;
(g) the issuer’s hedging transaction costs;
(h) the creditworthiness of the issuer and/or its guarantor; and
(i) in case of index warrants, the price and liquidity of the futures contracts relating to such index
Assuming other factors remain unchanged, the theoretical impact of changes in certain key factors on call and put warrants is illustrated in the table below:
Factor*

Derivative call warrant
price

Derivative put warrant
price

Price of underlying asset ↑

↑

↓

Volatility of underlying asset ↑

↑

↑

Time to expiry ↓

↓

↓

Interest rate ↑

↑

↓

Expected dividends ↑

↓

↑

* Please note that the table above only shows the theoretical relationship with the key pricing parameters. In reality, there are other factors affecting the price of a derivative warrant.