There is no sufficient margin settlement mechanics for prevailing covered warrant in Taiwan, thus the credit risk of warrant issuer must be considered when investors evaluate the price of covered warrant. This paper applies Klein's (1996) vulnerable option valuation model to empircially study the difference among the theoretical value of vulnerable warrant, Black & Scholes option price and the market price of warrant by using the domestic warrant data. Furthermore, this paper also analyzes the impacts of main variables on the price of vulnerable warrant through sensitivity analysis.