Empirical Analysis Of Convertible Bond Pricing In China

Convertible bonds as an integral part of corporate bonds have been popular in the world for many years,with both rights and debt properties.China's convertible bond market began in the 1990 s and the market size has expanded in recent decades.But China's convertible bond market started late,with foreign mature convertible bond market there are many differences.The research model of foreign market cannot be applied directly to the pricing of convertible bonds in China.For example,China's convertible bonds have a replacement clause,and the existence of a conversion protection period(usually 6-12 months)makes it more difficult to price convertible bonds.On the basis of research at home and abroad,this paper first explores the pricing of the option part of convertible bond pricing.This paper introduces the pricing model of binary tree options and discusses the effect of multi-stage risk-free interest rate on option pricing.Because interest rates tend to be random and stocks pay dividends,these factors affect the pricing of options.And the market has some important unexpected information will make the stock price jump process,explore the stock in the payment of dividends and random interest rate conditions,the use of actuarial pricing method to derive the stock price in the process of jumping European option pricing formula.Then an option pricing model is introduced: Monte Carlo simulation.Finally,the paper focuses on the process and principle of the Black-Scholes model pricing options.Because of the volatility of the underlying asset,one of the most important influencers in the Black-Scholes model,two ways to calculate and estimate future volatility are introduced: the GARCH(1,1)model;This paper studies the historical volatility used and uses it in combination with the Black-Scholes model to price the convertible options section.Another component of convertible bonds is the general bond portion.The price of ordinary bonds is easily influenced by market interest rate and corporate credit risk.Interest rates in the market change over time,interest rate changes on the convertible bond of ordinary bonds part of the impact,and the interest return of bonds will be affected by the company's default risk,so the company's default risk on the convertible bond part pricing.This paper takes the Black-Scholes model to combine the option stakes for China's convertible bonds with historical volatility,because this model takes into account the reality of China's convertible bond Central European options and is easy to calculate and has a small error.Considering the impact of interest rate and company default risk on the common bond portion,the impact of risk-free interest rate and interest rate fluctuation on China's convertible bonds is analyzed empirically.The credit rating and liquidity of convertible bonds will have some impact on the pricing of convertible bonds,so we also empirically analyze the impact of different credit ratings on the pricing of convertible bonds in China,and briefly analyze the characteristics of China's convertible bonds as partial debt.Therefore,in considering the actual situation of China's convertible debt,how to better model and preconditions for China's convertible debt pricing has a certain practical significance.