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Research On Convertible Bond Arbitrage Strategies

Posted on:2012-09-23Degree:MasterType:Thesis
Country:ChinaCandidate:S L ZhangFull Text:PDF
GTID:2189330335464611Subject:Finance
Abstract/Summary:PDF Full Text Request
The advent of margin trading and short selling ends the 20-year "one-way market" history in China and will further diversify convertible bond arbitrage strategies. This makes more meaningful our research on convertible bond arbitrage.This paper starts with a literature review of previous academic researches and then depicts the status quo of convertible bond arbitrage in both domestic and global markets. Our analysis to the efficiency of domestic convertible bond market reveals the possibility of conducting arbitrage to some convertibles. We then elaborate on different arbitrage strategies under varying circumstances and introduce our proprietary convertible arbitrage model, which is validated with data of TongLing Covertible Bond. We make some investment suggestions based on our research.Our analysis is characterized by:First, from the perspective of an investor, we tested our theory against real market data. This makes our strategies good guidance in the real investment world.Second, we analyze arbitrage strategies when short selling is allowed. Prior to 2010, academics did not research deeply under the short selling circumstance in that it was not permitted. We specially delved into the short selling scenario, reflecting the current market condition in China.Third, based on the special conditions in China, we respectively designed arbitrage strategies for convertible period and non-convertible period, and in separate scenarios where short selling is allowed and not allowed. Investors can choose any preferred arbitrage strategy at their own discretion. With a forward looking perspective, we have designed our strategies in such a way that they can all be implemented by automated trading programs.
Keywords/Search Tags:Convertible bond arbitrage, Arbitrage space, Margin Trading and Short Selling, Programmed trading
PDF Full Text Request
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