Financial Research On Option Bonds

In contrast with the situation of other countries, the Chinese market of negotiable securities has long suffered an imbalance in the marketed volume of the two major categories, i.e. bonds and stocks. Whereas stocks have attracted almost all the attention of investors, bonds - especially corporate bonds - have all along seemed to be neglected. This drawback gravely threatens the health, the standardization, and the balanced development of the market. Therefore, it is highly desirable to introduce various types of bonds and to modify unnecessary restrictions so as to facilitate market access of corporate bonds. These measures, apart from giving better play to the functions of the capital market in distribution of resources, in capital raising, and in improving corporate management, will be important prerequisites for solving the problem of structural imbalance of the securities market of our country. They will also be unavoidable steps to be taken to lower the systematic risk of the financial market.Against the generally favorable economic environment by virtue of the policy of further perfecting the mechanism of the socialist market economy and developing the securities market, which has been adopted by the government following the 16th National Congress of the party, many enterprises in our country have shown interest in exploring new types of instruments on the basis of the system of bonds, especially as a means to compensate for the present slump in the stock market. And Option bonds, as a type of hybrid instruments that combines the characteristics of both stocks and bonds, being easier to be accepted by all parties on the market and consequently easier to be applied and disseminated due to their nature as options like stocks, have been experimented by some enterprises in capital operation and refunding. As it is precisely observed that "Financial life knows no talents; experiences alone account"; the present dissertation sets out to study the operation of option bonds - a new type of bonds sharing some characteristics of stocks and also the sole convertible bonds on Chinese securities market - based on its 10 years' performance on the market, with a view to providing enterprises with one more optional instrument in handling increasingly intricate financial ventures and to helping promote the development of a rational, coordinated securities market in our country.This dissertation consists of six chapters grouped into four parts.The first part is an introduction that covers an exposition of the significance of the project, a brief review of researches dedicated in this field home and abroad, identification of the questions and the main points to be dealt with as well as themethodology adopted, and a summary of the conclusion of this study and the points where I claim originality.The second part, including Chapters One and Two, expounds the theories and the raison d'etre of option bonds and outlines the history, the necessity and the prospects of their development in our country. Chapter One establishes the theoretical framework of the study and shows the necessity of the emergence of option bonds. In defining the concept of option bonds and some other relevant notions, it explores the intension of the concept of option bonds by probing into the hierarchy of concepts of derivative instruments, hybrid instruments, derivative bonds, and option bonds, and points out that option bonds are a new type of instruments with one or more than one options embedded in bonds, which belong to derivative bonds. And then it analyzes their requisites by classification and discusses their three major characteristics. The chapter concludes with an observation that convertible bonds are a natural choice of the current development of option bonds in our country. Based on their 10 years' operation on Chinese market and on a review of their evolvement and an analysis of the reasons for their entering a mature phase of development, Chapter Two clarifies the concrete requirements for the further development of option bonds with a forecast...