The Research On The Use Of Simple Arbitrage Model In The Earning Bond Market Of China

CB is a kind of financial instruments that is based on the carrier of corporate bond and permits the holders of CB to convert it into common Stock at the stipulated price in the stipulated time.It owns bond and stock's properties, that is to say, not only its interest rate is lower than CB, but the issuer can harmonize the proportional relation of equity capital and debt capital, so as to benefit optimizing capital structure.Based on above,CB has become a kind of mature and popular financial instruments in the western developed countries. Nowadays, global convertible bond market takes on a new look and becomes more mature and prosperous as time goes by.In U.S.A,Europe-union,Japan and South-east Asian countries and regions,CB market has played an important part of financial market and boosted these countries and regions' financial market to prosperity. While in China, after these years' dreariness, Chinese CB market starts to grow rapidly.As an intermediate financial instrument, its development and prosperity is helpful to solve Chinese capital market troubles such as extortionate stock financing ratio,lack of investment tool and financial innovation.In order to intensify the research,first the paper depicts the evolution of CB market all over the world.At the same time,after deeply researching China CB market,the author finds some weaknesses.Based on these researches the paper gives some suggestions. Further research shows arbitrage exists in China CB market and CB's liquidity maybe can explain parts of arbitrage.All these findings give supports to further developing China CB market. The paper suggests from following to develop China CB market:Appropriate to extend the period of the convertible bonds, convertible bond market to relax the interest rate provisions.