The Pricing Study And Empirical Analyse Of The Convertible Bonds Of China

Convertible bond which has the dual functions of the fanancing and risk avoiding is a kind of hybrids between debt and common equity. So since1980’s,convertible bond has advanced dramatically in the international capital market. But in China, the development of convertible bond is still at the elementary period. Since convertible bond is a new financial instruments of Chinese capital market, the comprehension of market participants is far from intact and related theory researches are on the way. Under the circumstance, the empirical research on the pricing of convertible bond makes a lot of senses on Chinese convertible bond market and the innovation of financial instruments in China.The most difficult part of the convertible bond is how to determine its value. Most of previous researches on the pricing of the convertible bond directly used the foreign theories to analyze the convertible bond of our country and so did not take the special characteristics of our country’s convertible bond into consideration. Therefore, this article puts emphasis on the convertible bond of our country. This article analyzes the specific factors which influence the value of the convertible bond and the relationship among those factors and finds a suitable way to price the convertible bond of our country.The article firstly introduces the developing course of convertible bond and the pricing theory, Then elaborates the basic elements and terms of the design of convertible bond, Mainly introduces four kinds of commonly used pricing model, and analyzes their respective advantages and disadvantages.Then, select the method of binary tree as the pricing model of this paper. After that,we analyse the influence factors of the convertible bond’s value. Finally, by using the pricing model of binary tree combined with the market datas do we the empirical research, Received is different from some previous research conclusions, And the conclusion of specific reasons for the in-depth analysis, At the same time, we advances several Suggestions on improving the convertible bonds market in China based on that. In terms of the accuracy of the model, Compared with the results of some previous empirical research, we found that the accuracy of calculate result with the established binary tree pricing model in this paper is higher, the price action obtained by pricing theory is fitting the trend of market price very well. It’s able to explain some phenomena on the convertible bond market in ChinaAll in all, this paper builds a comprehensive framework about convertible bond in value analysis, Some of the conclusions are not only Provide a train of thought for the in-depth study of convertible bond in future,but also Provide the basis and the support for investors and issuers in formulating investment strategies and pricing.