Study Of The Pricing For The Chinese Convertible Bonds

The split-share reform ,which began on May 9,2006, was almost completed.And the biggest obstacle for the development of China convertible bond market is removed. The convertible bond market of china has been entering into a new development period. But most of the rescarch of convertible bond pricing in china are under the split share structure. So the recarch of convertible bond pricing with a "full circulation" background is very important.At first ,this thesis introduced the definition, basic elements of convertible bond, then presents the general situation of international and domestic convertible bond markets .After that, this thesis intorduced the development of international pricing models and the research of domestic achievement.On the basis of this,the thesis gives us a one-factor simplified model ,which considered the specific provisions of the domestic convertible bond. And then this thesis conducted empirical research based on this new model with the latest datas, which included 15 convertible bonds in the market.The comparison of the theoretical price and practical price proves that this model is applicable in china's bond market, and the convertible bonds in China's market are slightly underpriced, and it suggests that we can improve the market efficiency by enlarge the market scale, enhance the complete market and strengthen educations on investors.The innovation of this paper are: fisrt, this paper presents a model considering the new strategic goals of controling shareholders and the specific provisions of China convertible bond since the strategic goals of the controling shareholders changed under the new full circulation circumstance; secondly, this paper precisely calculates the model parameters with the application of spline method in the procession of bond trading datas from SSEC instead of simply assuming the constant interest rate under the term structure, which is more realistic to the discounting function under the term structure in China, and this paper also employed GARCH and EWMA models to calcualte the stock volatility instead of the simple standard deviation of stock price returns; thirdly, this paper used Montecarlo method to calculate the complicated frontier conditions of convertible bonds and conducted empirical test on the application of the model with the fourth quarter datas in 2006, and analysed the factors influencing the efficiency of China's convertible bond market.