Study Of The Pricing For The Chinese Convertible Bonds

Convertible bond is a kind of financial instrument having both the properties of stock and bond. Convertible bonds endow investors the rights to hold the bonds till maturity or to transform the bonds into stocks when they feel appropriate.Comparing with the stocks and ordinary bonds,convertible bonds have unparalleled properties both to the investors and the issuer. Since 90s of the 20th century, convertible bonds have become an important financial instrument in the world financial market.Convertible bonds are of great significance to the development of the Chinese capital market. Many problems exist in the Chinese capital market for a long time,such as the high ratio of stock financing, shortage of the investment instrument and the difficulties of the financial innovation. The development of the convertible bonds market can increase the ratio of the bonds financing,which makes the company adjust their capital structure more flexible and also makes the investor have more choices to invest. In a long term, convertible bonds will become one of the most important financial instruments in Chinese capital market. Chinese convertible bonds market has wide development space.The essential issue regarding the study of the convertible bonds is the study of the pricing. Convertible bond is a kind of derivative securities which has the property of stock,ordinary bond and option,so the pricing of the convertible bonds is much more complicated than ordinary securities. The pricing of the convertible bonds includes setting down the par value and the option value. The pricing requests high specialties. The study expatiates the basic concept, property and correlative term of convertible bonds firstly. Then the pricing theory of convertible bonds is analyzed. After that,a pricing model of Chinese convertible bonds is given,in which the special property of Chinese convertible bonds is taken into account. Then a experiential test is given for a particular convertible bond. The reseach for the Chinese convertible bonds is far from systemic,so this study is of great theoretic significance.In the first chapter, the basic concept, property, correlative term of convertible bonds and the development process of Chinese convertible bonds are introduced briefly. In the second chapter, the general method of the pricing for the derivetive securities, which is useful for the followed study, is discussed. Then in chapter 3,the representative pricing theories for the convertible bonds are analyzed, which includes single factor model and duble factor model. In the fourth chapter, LYON, a new convertible bond, which is used widely nowadays, is introduced, and the pricing model for LYON is given. Using the referrence of the pricing model of LYON, a pricing model for Chinese convertible bonds is given. In this model, the special property of Chinese convertible bonds is taken into account. Risk free rate and stock price volatility are included in this model. Before solving the equation, the parameters must be choosed and estimated. The pricing model for the convertible bonds is a stochastic partial differential equation. Generally speaking, this kind of equation has no analytic...