Warrant Valuation: Intrinsic Value and Time Value

Here we explore the two components of the value of a warrant, the intrinsic value and the time value. The intrinsic value is the difference between the price of the underlying asset and the strike price, and the time value is the difference between the warrant's premium and the intrinsic value. We look how the premium and intrinsic values are calculated for traditional and covered warrants, discuss a warrant's moneyness, and then outline the factors that affect a warrant's time value.