Study On Pricing Of Convertible Bonds And Investment Strategies

Convertible bonds has appeared in China security market a few years ago, with drastic progress in recent years, which has already ranked among the main financial instruments for listing companies and investment varieties at the second-market. For the pricing theory of convertible bonds has neither been fully studied, nor sensed by market-participants, there arise a series of problems such as the relatively low price of convertible bonds at market, and mismatch of revenue and risk, etc. Thus, the appropriate pricing of convertible bonds bear favorably on investors and issuers, as well as the healthy development of the convertible bonds market. With the development and perfection of the capital market in China, convertible bond(CB), which is the familiar financing mode in the west developed countries, is gradually accepted and used. It not only exploits the financing channel of enterprises and extends the modes of market investment, but also is important to flourish and promote the development of securities market. The article introduces the development of CB in China and new trend of CB market that is changed by the QFII entering and the issued Fund of CB. At the same time, the article takes the CB's value into two parts: the bond's value and the option's value. It discusses the theoretic pricing model of CB on the base of Black-Scholes model and validates the uniform degree about Yinggang's CB between the result, which is calculated by theoretic pricing model, and actual price to provide the reference about CB's issue and investment. In consideration of positive results and features of domestic convertible bonds, the author presents the investment strategies of convertible bonds. Namely, positive study informs us of the existent grave errors in the pricing at domestic convertible bonds market, and thus invalidity can be used to gain risk-free arbitrage revenue, the transactions of which are, objectively, able to prompt the return of the market value to the theoretical value and the deduction of the invalidity of market, and should invite favorable evaluation.