An option which is issued by a financial or non-financial institution whereby the holder is granted the right to purchase the underlying (usually other equity securities) at a certain price during a specific period of time. Such an option could also take the form of put warrants on a specific, valuable and tradable asset (like gold). The issuer will then attempt to establish a market for the warrants.
In case the holder wanted to exercise his right in redeeming the underlying asset, he would need to approach the issuer. For a non-financial firm, warrants could be used to sweeten a bond issue by attaching them to the to-be-issued bonds. As a result, potential investors would see those bonds more attractive as investments.
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