Research On The Pricing Error Of My Country's Convertible Bond Market

The most basic problem of ZhongGong convertible bonds is obviously its pricing problem.For its issuing company,China ZhongGong,the issuance of convertible bonds is based on two purposes:first,reducing financing costs,mer ging more capital at lesser cost,reducing the issuance costs of issuing common shares,and reducing The payment of a general bond requires a higher interest paid on the convertible bond.Second,since the re-transfer of debt can be converted into the characteristics of the company's stock,the issuance of convertible bonds also represents China ZhongGong expectations for its own future pe rformance.Therefore,the pricing of ZhongGong convertible bonds is especially important for China ZhongGong.It not only decides whether itcan be successful in financing,but also provides funds for future development.lt also decides whether the issuance of convertible bonds can really reduce itsown financing costs and show its expectations for future performance.Therefore,in order to reduce the pricing errors and improve the pricing accuracy of ZhongGong convertible bonds,this paper draws on the Binary Tree Pricing Model,a mature pricing model of convertible bonds abroad.Firstly,this paper analyses the basic elements and special clauses of ZhongGong Conversion Debt,and then uses MATLAB to compile the program,and uses the unmodified binary tree model to analyze the pricing of ZhongGong Conversion Debt.On this basis,credit risk is introduced to modify the binary tree convertible bond pricing model,and then the binary tree pricing model is revised again from the Dynamic risk-free interest rate,and the theoretical price of Chinese ZhongGong convertible bond is ealculated daily to compare with its actual price.Finally,the conclusion is drawn that the credit risk and Dynamic risk-free interest rate has an important impact on the price of ZhongGong converted bonds.After considering the credit risk and Dynamic risk-free interest rate,the revised binary tree model improves the pricing accuracy of ZhongGong converted bonds significantly and predicts its price trend successfully.This paper holds that the difference between the theoretical price and the actual price of the revised ZhongGong Debt Conversion is mainly due to the choice of parameters,poor liquidity and the lack of short-selling mechanism in China.