Random Interest Rate Under The Convertible Bond Pricing Model

Convertible bonds are advanced financial derivatives with the dual function of financing and hedging, which have hybrid properties of bonds and options. Reasonable pricing of convertible bonds has great practical significance to both issuers and investors, however, because of the complexity of their value forms, the pricing of convertible bonds has become extraordinarily complex.Under the assumption of stochastic, stock price and interest rate was respectively characterized by Index O-U model and Geometric Brown motion model,this paper applies the pricing of martingale way to give a precise value formula of common convertible bonds and some other special convertible bonds which thoroughly considers the back buy treaty, back sell treaty, stochastic interest rate.