A third-party warrant that is issued by a company (usually a bank or financial institution) on the stock of another company. An example is the covered warrants issued by Bankers Trust using various Japanese equity warrants. In contrast with corporate warrants, this type of warrant is issued solely as a trading instrument. Like options, covered warrants can be American-style (exercised any time before expiration date) or European-style (exercised only on the date specified). Most warrants are purchased and then sold back to the issuer before expiration. If a warrant is held to expiration, it will be bough back for cash automatically, in which case the issuer pays the difference between the exercise price and the current price of the underlying security.

This warrant is also known as a synthetic warrant.