Convertible Bonds Pricing Models And Empirical Research

Convertible bonds, which have the characters of both options and bonds, are hybrid financial products resource from stock and bonds. The character of the hybrid satisfies the demand of investor and investee, which provides the two side with advantages outweighing pure stock and pure bonds. However, as a complicated derivative financial tool, the development of convertible bonds is not always good. And the precise pricing of convertible bonds is crucial for reasonable using the financial tool. Hence, this thesis begin with pricing theory of convertible bonds, and end with a empirical study of pricing in China's convertible bonds market.This thesis firstly reviews the development of convertible bonds in the world, by analyzing the research on convertible bonds, the method of using the corresponding stock price as main factor is chosen. After carefully analyzing the property of convertible bonds, structure of value and detailed provisions, this thesis research on the intrinsic bonds, options and their combined value. To the value of bonds, market interest rate containing risk is used for discounting pricing; while to the value of options, classical Black-Scholes model and binomial tree model using risk-free interest rate are employed for pricing. Moreover, this thesis mainly revises the model by quantifying all the provisions, such as put provision, call...