Studies On Pricing Of The Chinese Convertible Bond

Convertible bond has appeared in China securities market and developedrapidly in recent years.Because of the dual functions of the fanancing and riskavoiding ,it has advanced dramatically in the international capital market. Butin 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 theoryresearches are on the way. Under the circumstance, the empirical research onthe pricing of convertible bond makes a lot of senses on Chinese convertible bondmarket and the innovation of financial instruments in China.This thesis firstly reviews the related literatures of convertible bonds , Bystudying the nature of incorporated option,it is clear that incorporated optionis not a standard option,but an exotic option called Exchange Option.Pricingmodels of convertible bond has seldom involved this point before. They simplyregarded the option incorporated with convertible bond as a standard option,So there is need to improve the pricing model significantly in light of ExchangeOption.Then,by using the model of the previous chapter, this thesis selects 30 con-vertible bonds in February 2000 to early 2008 from Shanghai and Shenzhen secu-rity markets, empirically studies China's convertible markets. From the analysisof sample data , this thesis concludes that the theoretical price calculated bythe model presented by this thesis is very close to the real price in the market.Although some di?erence also existed, as a whole, the thesis's model can explainthe value structure of the convertible bonds, and be used to fairly precise pricing of convertible bonds.