Pricing Of Convertible Bond With Reset Clause Under Stock Price Obeys Jump Diffusion

A Convertible Bond (CB) is a corporate debt security that gives the holder the right to exchange future coupon payment and principal repayment for a prescribed number of shares of equity .Thus it has an equity part and a fixed-incomed part,and may contain some additional features,such as callability and puttability.Typically these bonds are also callable,that is,the corporation issuing the bonds retains the option to repurchase them for a predetermined price. Compared with straight bonds and stocks, there are many different research methods of CB for its special characteristic.CB or more generally equity-linked security has greatly evolved in the past decade.In recent years,various CB have been issued with additional conversion provisions.Some Japanese bank CB has reset clause whereby the conversion ratio is adjusted upwards,or equivalently, the conversion price adjusted downwards if the underlying stock price does not exceeded pre-specified trigger prices.Many researchers in home and abroad study deep into CB and achieved certain results.Research of this paper is based on scholar's studings about this question,using method of deviding the value of CB,this method is simplicity and practice,it is very easy to price the value of CB.This paper builds pricing model of CB with reset clause under the stock price process obeys to Brownian Motion of jump diffusion. Assume the stock price process obeys Brownian Motion model of jump diffusion,and then pricing European call optin under the stock price process obeys to jump diffusion model, Considering reset clause of CB,converting the value of convertible option of CB to integral of European option. lastly,we builds pricing model of CB with reset clause under the stock price process obeys to jump diffusion model.