Research On The Influence Of Underlying Stock Price Volatility On The Value Deviation Degree Of Convertible Bonds

With the abundance of financial instruments in the capital market,convertible bonds attract more and more attention from investors and fund-raisers.As a financial instrument of both debt and stock nature,convertible bond is regarded as an ideal investment product because it can bring investors equity income and protect the value of investors’ bonds.However,the position of convertible bond market in China’s capital market is still low,which also reflects the unbalanced structure of China’s capital market.Equity financing is the first choice for most enterprises,which is not conducive to the sustainable development of China’s capital market in the long run.Stock market and bond market are the most important parts of China’s capital market.Convertible bond,as a hybrid financial instrument,is known as the bridge connecting the two markets.For investors,it is crucial to study the degree of value deviation of convertible bonds and the factors affecting their value deviation,which can effectively guide investors to choose the right time to make reasonable investment.A large number of experiences show that the value of convertible bonds deviates on the first day of issuance.This paper starts from the stock market and analyzes the influence of underlying stock price volatility on the value deviation degree of convertible bonds.In this paper,122 convertible bonds issued in Shanghai and Shenzhen from 2017 to 2019 were selected to calculate the historical volatility of underlying stock prices.The extended Black-Scholes option pricing model was used to calculate the theoretical value of the first day of issuance of convertible bonds.By comparing their market prices,the value deviation degree of 122 convertible bonds was calculated.The multiple regression model of the total sample is established,and then grouped regression is conducted according to the credit rating of the sample convertible bonds.The influence of underlying stock price volatility on the value deviation degree of convertible bonds and the influence of stock price volatility on the value deviation degree of convertible bonds under different credit ratings is analyzed.The results show that the underlying stock price volatility is positively correlated with the value deviation of the convertible bonds,and the impact of the underlying stock price volatility on the value deviation of the convertible bonds with higher credit rating is greater.This paper suggests that the issuer should analyze the stock price fluctuations of the underlying stock market before choosing the issuing time of the convertible bonds,and choose the appropriate time to issue the bonds.When the stock price fluctuates violently,the issuing of the convertible bonds can appropriately improve the setting price of the convertible bonds.This paper gives Suggestions for investors is to choose the high credit rating of convertible bonds,and pay close attention to is the volatility of the stock situation,when is stock volatility,convertible bonds more likely to be underestimated,which earn money buying convertible bonds are also more likely to have,but also to prevent are too violent the investment risks of stock price fluctuations.