Empirical Research On The Case Pricing Of Convertible Bonds Of Listed Companies In China

Convertible bonds are complex and widely used financial instruments combining the characteristics of stocks and bonds.The possibility to convert the bond into a predetermined number of stocks offers participation in rising stock prices with limited loss potential, given that the issuer does not default on its bond obligation.Evaluation is the most important and the most difficult problem about convertible bond. Convertible bonds often contain other embedded options such as call and put provisions. These options can be specified in various different ways, further adding to the complexity of the instrument. This paper based on mature option pricing theory and the pricing of convertible bonds of western,and according to convertible bonds market of China, to price the convertible bonds listed in stock market—Yang guang and Fu xing convertible bonds by using binomial -tree model.The paper is organized as follows:In Chapter 1, we introduce the conception, characers of convertible bond and the history of the pricing theory about convertible bond.In Chapter 2, we compare the classic theory about option pricing in convertible bond. We clarified the reason of using binomial -tree model.In Chapter 3, we explaine the principle of sample choice, describe the date set and the result of parameter estimatied.In Chapter 4, we conduct the empirical study by using binomial -tree pricing model to the convertible bond listed in China—Yang guang and Fu xing convertible bonds. We use the binomial-tree model that accounts for all important convertible bonds specifications and is therefore well suited for pricing convertible bonds.The Chapter 5 is the conclusion of this paper. The empirical analysis shows that the binomial -tree pricing model has the character of pricing.