Index warrant holders are generally not protected against changes in the composition of the underlying index.

Question

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In addition to standard option risks,the long time to maturity of a warrant contract means that the probability of extraordinary events,such as company delisting,bankruptcy or takeover,is increased when compared to shorter dated standard options.In the case of index warrants,changes in the composition of the index occur,and the warrant holder may receive no protection from these events.

Index Warrant Holders Are Generally Not Protected Against Changes in the Composition