| Convertible bond which has the dual functions of the fanancing and risk avoiding is a kind of hybrids between debt and common equity. So since 1980's, convertible bond has advanced dramatically in the international capital market. But in China, the development of convertible bond is still at the elementary period. Since convertible bond is a new financial instruments of Chinese capital market, the comprehension of market participants is far from intact and related theory researches are on the way. Under the circumstance, the empirical research on the pricing of convertible bond makes a lot of senses on Chinese convertible bond market and the innovation of financial instruments in China.This thesis starts with the definition of convertible bond. With the induction and deduction of the characteristics and essential elements of convertible bond, it then carries out lucubrate analysis on the value and influencing factors of convertible bond. The thesis introduces the Black-Scholes model and binomial tree model. Aims at the characteristics of Chinese security market, the thesis constructs a binomial tree model with credit risk which reflects the impacts of bond provision, conversion provision, call provision and put provision on convertible bond value. The thesis takes Jinniu convertible bond to carry out empirical research. And the result indicates that the price of convertible bond was significantly underestimated when comparing with the theoretical price. Reasons of the error are investigated. At the end, the thesis analyzes the arbitrage opportunities of convertible bond in the Chinese market. Arbitrage opportunities exist when the prices of the convertible bond and the underlying stocks are different.Above all, the thesis provides a comprehensive valuation framework of Chinese convertible bond and carries out empirical research on the pricing of convertible bond. It not only supplies hints for further studies on convertible bond but also provides references for investors. |
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