The Utility Indifference Pricing Of Convertible Bonds

With increasingly fierce competition in the capital market,increasing financing cost-s,with a lower coupon rate convertible bonds by enterprise’s favorite.Simultaneously,the con-vertible bond is financial instruments that the equity investors and bond investors are in-volved in. Therefore Chinese convertible bond market is developing very rapidly in recent years.Learn from foreign convertible bonds mature theories about pricing, Pricing and ap-plied research on convertible bonds in line with Chinese national conditions have a great role in promoting.Pricing convertible bonds at home and abroad about the main:factors affecting the company’s assets as a structured approach and the company’s stock price as the influencing factors of reduction method.They have advantages and disadvantages,taking into accoun-t the characteristics of the Chinese market,the value of the company’s assets and stock prices in many cases was not significantly related,but its convertible bonds closely related to both.Therefore, We refer to the literature method,this paper as the two factors that affect the convertible bond prices,using the utility indifference pricing framework on the convertible bond pricing. Based on the actual situation of convertible bonds,take into account the terms with put provision convertible bonds,the company’s assets and the value of the common stock price effect of the convertible bond prices as factors.The use of this utility indifference pricing of convertible bond pricing corresponding mathematical model,to obtain a mixed problem for a class of non homogeneous partial differential equations. Application of separation of variables gives series in the form of an explicit solution of the utility of this convertible bond pricing undifferentiated. This solution has the explicit calculation easy, rapid convergence characteristics.The last,analyzes the impact of risk aversion coefficient,value of the company and the stock price correlation coefficient and other parameters on convertible bonds.