Pricing Of Convertible Bonds And Its Effect Evalutation In Chinese Market

Chinese convertible bond market is in a stage of rapid development,and it is of great significance to study the issues related to the pricing of convertible bonds.The mystery of convertible bond discounts has always been a concern in the academic world.What are factors involved in the pricing deviation of convertible bonds,and what effect does the degree of issue discounts have on company performance? This paper selects the relevant data of Chinese convertible bond market from 2006 to 2018,and uses the least square Monte Carlo simulation method to conduct theoretical pricing.The research results show that the convertible bonds generally have discounts during the issuance period and duration,and the degree of pricing deviation is significantly related to the value of the option value,the stock price volatility,the conversion premium rate,the distance due date and the credit rating.On this basis,further research found that the degree of convertible bond issuance discount has a significant positive correlation with the announcement effect of the company’s convertible bond issuance.This paper believes that the higher the discount rate of the convertible bond issuance is,the investor will have stronger willingness to obtain the shareholder status of the company so as to participate in the placement,thus the more funds flowing into the underlying shares on the announcement date.Meanwhile,the study found that the degree of convertible bond issuance discount has a significant positive correlation with the company’s business performance.According to the information asymmetry compensation hypothesis,the higher the discount rate of convertible bond issuance is,the more compensation the company gives to investors’ information asymmetry,which helps to reduce agency problems and enhance company value.In addition,the consistency of the relationship between company’s announcement effect and operating performance and the degree of issuance of discounts indicates that convertible bond investors are quite capable of judging corporate value.The main contribution of this paper is to combine the research on convertible bond pricing,company announcement effect and operational performance.The paper innovatively introduces the degree of convertible bond issuance discount as a new consideration dimension,and evaluates its impact on announcement effect and business performance after the company issues convertible bonds.