Analysis On The Terms Of Convertible Bonds And Its Impact On The Interests Of Related Parties

Convertible bond is an appropriate kind of hybrid financing instrument, but the issuing scale is small in our market. On one hand, restrictions make it difficult to issue convertible bonds of listed companies. On the other hand, conflicts between the terms of convertible bonds make listed companies have concerns. This paper aims to expound the causes of conflicts between the terms of putable and resettable conversion prices, abolish putable terms and build Delta arbitrage models to protect holders of convertible bonds’ interests through financial market, and make the convertible bonds market develop healthily.In this paper, literature research is used to summarize researches from a lot of scholars in three areas including interest demands from issuers, holders and contractual terms. Descriptive statistics method is used to summarize the status and the terms of the convertible bonds which have been issued. Case study is applied to analyse the causes of conflicts between terms of putable and resettable conversion prices in the contrarian market. Besides, we also use experimental research method to test the effects of protecting holders of convertible bonds though Delta arbitrage model.Experimental results show that the holders of convertible bonds’ interests can be protected by themselves though Delta arbitrage model which can solve the interest conflicts of convertible bonds tripartite. Despite the results of arbitrage are affected by the higher trading rates of short selling, the holders of convertible bonds’ interests also can be protected by themselves through Delta model after the issue of stock options in the market.