A Study On The Evaluation Of Chinese Option-embedded Bonds And Pricing Errors

In this thesis,we evaluated 60 most traded puttable bonds in Chinese bond market between January 1,2015 and December 31,2015,applying Hull-White model,Black-Karasinski model and Black-Derman-Toy model in combination with two different pricing processes:risky interest rate pricing method and the probability of default pric-ing method.The systematic comparison indicates Hull-White default rate model gives the best performance among the six models.Then we introduced ten variables,which are related to macroeconomic condition,corporate management condition and bond li-quidity,to interpret the pricing errors from the application of Hull-White default rate model to 2015 data and took those panel data regression coefficients to correct pricing results between January 1,2016 and June 30,2016.The pricing results significantly improved after correction for a better fitting and prediction to the real trading prices.Finally,we demonstrated that the traditional financial theory and the panel data analysis method should be combined to comprehensively evaluate the option-embedded bonds in Chinese bond market.