A Comparative Study On The Validity Of Convertible Bond Pricing By Binary Tree Model And B-S Model

After the introduction of new financing rules and reduction rules in 2017,convertible bonds have gradually become the new favorite of the securities issuance market,the scale of issuance is increasing,the number of investors concerned is also more and more,the market is constantly convertible bond funds set up,the market’s attention to the heat is also increasing.However,compared with the model pricing method used in the developed country market,the pricing of convertible bonds in China mainly refers to the average transaction price before the announcement of convertible bonds,and its rationality is still debatable.Taking the issue pricing of convertible bonds as the starting point,this paper makes an empirical study on convertible bond market in China.In order to study the rationality of the listing pricing of convertible bonds in China,this paper selects two classical models of Black-Scholes model and two-fork tree option pricing model to test the issue pricing of convertible bonds issued in 2012-2018,and compares the differences between model price and actual price.After that,through the calculation and analysis of the case of national electricity transfer debt,this paper shows more intuitively and concretely the difference of pricing and distribution pricing of two models,and gets the following conclusions:(1)The theoretical value of the sample convertible bonds calculated by two models is higher than that of their issuance and pricing,and(2)through the combing of the terms of the sample transfer debt,The coupon rate of convertible bonds in China is inflexible and linked to the price of conversion.This is one of the reasons why the pricing of convertible bonds in China is lower than the model calculation price;(3)The innovative clause design of convertible bonds in China lacks innovation and does not take into account the value of convertible bonds as a whole.In view of the above problems,this paper also gives countermeasures and suggestions.First,it is recommended that issuers and underwriters refer to the calculation results based on the Black-Scholes model and the two-fork Tree option pricing model when determining the conversion price.Second,it is recommended that issuers and underwriters combine resale prices with the characteristics of the enterprise to determine the coupon rate more flexibly.Third,it is recommended that issuers and underwriters innovate the design of the relevant additional terms.