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The Research On Valuation And Provision Design Of Convertible Bonds

Posted on:2005-04-28Degree:MasterType:Thesis
Country:ChinaCandidate:G TangFull Text:PDF
GTID:2156360125958748Subject:Management Science and Engineering
Abstract/Summary:PDF Full Text Request
Due to its unique risk-revenue attributes, convertible bonds are welcomed by both issuers and investors. Nowadays, global convertible market takes on a new look and becomes more mature and prosperous as time goes by. After ten years' dreariness, Chinese convertible bond market starts to grow rapidly. As an intermediate financial instrument, its development and prosperity will benefit a lot on Chinese capital market troubles such as extortionate stock financing ratio, lack of investment tool and financial innovation. It also does well on the maturity, consummation and dissolution of financial risk.Since convertible bonds are new financial instruments of Chinese capital market, the comprehension of market participants is far from intact and related theory researches are on the way. Under this kind of circumstance, the research on convertible bond value and provision design of this thesis makes a lot of sense on Chinese convertible bond market and the innovation of China financial instruments.This thesis starts with the provision composition of convertible bonds. With the induction and deduction of the provisions, it then carries out lucubrate analysis on the value and influencing factors of each individual provision. Aims at the characteristics of Chinese security market and the difficulties of pricing, this thesis constructs a binomial tree model with credit risk which reflects the impacts of bond provision, conversion provision, call provision and put provision on convertible bond value. This thesis takes 9 convertible bonds in the market to carry out empirical research. And the results indicate that the prices of Chinese convertible bonds were significantly underestimated when comparing with the theoretical price. Reasons of the error are investigated and sensitivity analysis is studied. At the end of the thesis, provision design of Chinese convertible bond is discussed.In all, this thesis provides a comprehensive valuation framework of Chinese convertible bonds and discusses the provision design. It opens the train of thoughts on further researches, and provides references for both issuers and investors.
Keywords/Search Tags:convertible bond, internal value, binomial model, issuance provisions
PDF Full Text Request
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