Theoretical And Empirical Analysis Of The Pricing Of Convertible Bonds In China

Convertible bonds have become the favorite of issuers and investors, because they have both the advantages of the stocks and bonds. To guarantee convertible bonds be successfully issued and conversed, the issuer needs to establish a money-raising policy. The investor needs to draw up the investment decision rightly to avoid the risk and to get desired profit. Reasonable price of convertible bonds can affect their issue and conversion. So the scenically valuating of convertible bonds becomes the key. The value of convertible bonds can be made up of three parts and be affected by concrete provision. In fact, convertible bonds are restricted by call provision, by put provision, and by provision to lower the conversion in our country, implying various options. So it makes valuating of convertible bonds very complicated. By comparing some popular option theories in international, one of them is chosen to decide the price of convertible bonds in this paper. I revised it rightly and get price model including concrete provision. By finite deviation method an approximate answer can be found, and by two typical examples the substantial evidence analysis can be carried on. The conclusion proves that concrete provision affects the value of convertible bonds, so careful consideration should be given while drawing up concrete provision. And the analysis demonstrates that this Valuating model has some limits and disadvantages and improvements are needed.In this paper, the foremost innovation is to make useful comparison of several popular international valuating theories of convertible bonds and finally by adoption of finite element thought to attain the applicable valuating model according to the idiographic terms and conditions of China' s bonds investment market, and to make simulation of the model according to the factual cases. Subservient results have been acquired after figuring out the model via finite differential method and Visual B progress, and via analytic demonstration of two typical examples of valuation.