A warrant that is attached to a straight debt instrument, giving the holder to the right (option) to exercise on either the issuer’s stock or other debt instruments. This warrant comes in many forms including covered warrant (warrant on a third party’s equity) or one that may give the holder an option to exercise into the issuer’s preferred stock. The package (bond and warrant) helps an issuer reduces its effective cost of capital. The bond is normally issued at par value, with maturities ranging from one to ten years. Later on, its value, along with that of the warrants, fluctuates depending on the warrants’ intrinsic value and time value. The warrant can be detached and traded separately.

Attached warrants can be linked to a range of references, mainly the price of the bond issuer.