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Dear Simon, Please help. How does a dividend affect the matrix of a vanilla warrent. Does the matrix on ex-dividend automatically reduce by the amount of dividend declared, in which case a warrant bought say at 100c with dividend of 5% would be worth 95c ex dividend before any movement in the underlying? Or does the matrix simply track the underlying. Thanks, Dave
firstly, dividend does not effect a warrants price as it is worked otu of the formula. The maxtrix will be adjusted on ex-div date so as to remove dividend without hurtign the warrant.