The Pricing Of Convertible Bonds Based On The Gaussian HJM Framework

A convertible bond is a typical stocks, bonds and stock options mixed financial products, which is similar to stocks and bonds as well as the nature of options, but also has its own unique character. Since the 1970’s in last century the age of rapid development, the convertible bond has become an important mean of corporate finance, but also a more important investment way of the investors. Meanwhile, scholars around the world also have researched on convertible bond pricing model actively. This paper is a trial of Convertible Bonds Pricing Theory in the new model based on the new method.In this paper, the complexity of the term structure of interest rates, the introduction of stochastic interest rate related models, the use of the term structure of the Gauss distribution of the HJM model, then consider joining the credit default risk, the establishment of mobile revenue option notes (Liquid Yield Option Notes, referred to as the LYONs or LOYN) of pricing jump diffusion model of three factors, the final pricing by martingale pricing formula. Option Notes in mobile revenue is a zero-coupon rate, convertible, back to the sale and redemption of the bonds, essentially zero-coupon bonds and stock options, put options, a variety of redemption options and derivative fixed income product phase bonds with the complex derivatives. Therefore, options on mobile gains notes (LYON) of a certain representation.The introductory part of this systematic review of the theoretical basis of convertible bonds, the main domestic and foreign research methods, research results, important documents related fields were introduced.Chapter II briefly introduces the basic concepts of convertible bonds and the basic elements of mainstream financial economics, foreign term structure of interest rates the basic model. The third chapter describes the term structure model in the HJM model is very important, and the Gaussian HJM model is derived and used several examples to illustrate the Gaussian HJM framework of a unified treatment of the interest rate term structure model.In chapter four, the more simple and far-reaching implications of current income Option Notes (LYON), for example, is derived under the Gaussian HJM framework with the default risk of the convertible bond pricing formula.The main innovation is a detailed study of the Gaussian HJM framework with the risk of default of convertible bonds (LYON) the pricing formula, and the initial out in the Gaussian HJM framework, the discrete distribution under the condition of the tree model based on polynomial pricing formula.The deficiency is that the pricing formula for the empirical part due to technical reasons, not to carry out intensive research. And it can also be done as a follow-up to further study.