Convertible Bonds And Its Practice In China

The function of the financial system is to reduce the information cost and the transaction cost under uncertain conditions, to strengthen the liquidity of the financial assets. The final goal of the financial system is to distribute economy resource effectively. The system consists of the financial markets and the fundamental payment systems. The financial market includes the bond markets,the stock markets and the newly emerging derivative financial instrument markets. Accompanied these developing markets, the structure of the global financial system has fundamentally changed. The new financial instruments which include future,swap,option,liquidity yield option note have sprung up.In all kinds of financial instruments in the modern financial market, the convertible bond is a kind of financial innovation with distinctive property. The convertible bond can provide investors with the fixed returns and the high floating return. In addition, investors can choose their investing strategies by themselves according to his preferences and the financial market's situation. On the other hand, the demander of funds can acquire both advantages of the low payment rate of the bond markets and the attraction of the stock markets. As a result, the demanders and the suppliers of the convertible bond will find their joint at the same time.As the economy reforming deepened, the china financial market has taken public opinion seriously. In the past decade, it has achieved a lot and played more and more important role in the economy resource allocation. Up to now, the convertible bond has existed about one hundred and fifty years. Nowadays, the convertible bond has become a widely used and well-tried financial instrument. But it is still a rather new financial instrument in the china financial market. The development of the market economy and the financial market brings some positive promoting factors to the development of the convertible bond in china. Because of these positive factors, we can improve the china financial market and meet investors' diversified demand with this new financial instrument.The thesis develops as following:The first chapter briefly analyzes the convertible. The first section discusses the attributes of the convertible and points out that the convertible bond is the compound of a series of terms. The issuing company can flexibly adjust these terms according to the financial market change and the issuing company's anticipation. That is just the selling point of the convertible bond. The second section takes the liquidity yield option note (LYON) as an example to understand the properties of the convertible bond and the entire process of the financial instrument innovation in the western financial market. The third section introduces the modern analyzing method of the convertible bond pricing methods. We learn that if we regard the stock price ,company value and interest rate as the fundamental variables, the price of the convertible bond is the function of these fundamental variables. So, we can conclude that the pricing process is to find the function. Then we set up a single-factored pricing model of the convertible bond based on the stock price. The forth section discusses the economic reason why the convertible bond emerges and develops. We know that many companies prefer to issue this complicated financial instrument today. The reason is that the convertible bond is a low-risk financial instrument. What is more, the issuing company can benefit from the convertible issuing process. The second chapter analyzes the effects of the convertible bond in china. On the condition of thinking highly of the convertible bond, we can get better results and more experiences. The chapter is divided into three sections. The first section takes a brief review to the development of the convertible bond in china. The second section points out that the state owned company is in some difficult situations which are the barriers to these company further reforming. The section discusses the topic from...