Convertible Bond Investment Strategy Research

Financial market can constantly create new products and satisfy the needs of investors and enterprises . The vitality power of financial market comes from this ability. Convertible bonds are a kind of new financial tool that suits the needs of the market.A Convertible Bond is a straight bond with an embedded equity call option. It is believed that Convertible Bonds are an asset class with risk----return characteristics that are superior to those of pure bonds, pureequities, or a blend of bonds and equities.This essay focuses on the theoretic and practical analysis of Convertible bonds investment strategies. On the basis of the analysis of Convertible Bonds concept, characteristics, how to price, risk and return, investment strategies are finally reasoned.The essay consists five parts: first part introduces the characteristics and the designing of the convertible bonds. It also introduces the history of the development of convertible bonds in foreign and domestic market and reviews the papers of the pricing of the convertible bonds. The value of the convertible bonds=the value of bond + the value of European call option value + the value of sold back + reset value - the lost of investor's put option. As the development of Chinese convertible bonds is still in the prime stage, the domestic related research that develops very fast is still in its initial stage.Second part is about the convertible bonds pricing theory. This chapter makes a systematical analysis of convertible bonds pricing.Third part analyses convertible bonds investment advantages and investment disadvantages which are the basis of the study of investment strategies.In addition, different investors have different taste for convertible bonds. So it is necessary to find other valuation index. At the end of this part, we build a valuation system for the first time in Chinese convertible bonds market.In the fifth part , On the basis of the previous chapters, we discuss the problems concerning convertible bonds portfolio, convertible bonds arbitrage, convertible bonds hedging strategies with relation of Chinese special circumstances.Finally, in the end of this essay, we conclude the conclusion of the total essay, and discuss the developing trend of Chinese convertible bonds market.