Abstract: Studies the pricing of covered warrants on correlation between returns and volatility.Based on the Stein and Stein option pricing model,the European covered warrants pricing model is derived using characteristic functions technique as put forward by Scott.Coefficients of correlation between returns and volatility are different,sensitive to covered warrants price.Changes of the at-the-money warrant price are not obvious,but changes of out-of-the-money warrant are more pronounced than changes of in-the-money warrant.The covered warrant price model considers the effect of correlation between returns and volatility,and provides theoretical guidance for the special domestic derivative market.