A Case Study Of Pricing Of "Xugong Convertible Bonds"

This paper first reviews the development process of convertible bonds with the related literature,and understand the evolution of convertible bonds and the evolution of pricing methods.In 1977,Ingersoll2 first used the Black-Scholes pricing method to study the pricing of convertible bonds,in the study of the basis of convertible bonds and redeemable can be used in the study of convertible bonds,foreign mature,which is related to its long history of development,In the case of convertible bonds,the partial differential equation is introduced,and a single factor model based on the value of the firm is proposed.Later,there are finite difference method,binary tree hair and Monte Carlo simulation method.Secondly,this paper explains the definition of convertible bonds,analyzes the factors of convertible bonds,and analyzes the factors that affect the price of convertible bonds,including the corresponding stock price,risk-free interest rate and coupon rate.This paper analyzes the advantages and disadvantages of convertible bonds and other financing methods,and compares the cost advantages and operational advantages of convertible bonds and other financing methods.Then,the four options pricing models are described and compared,B-S model,binary tree model,finite difference method and Monte Carlo simulation.Then it is the case analysis part.Firstly,the background of the case is analyzed,and the distribution factors,distribution and market performance of Xugong convertible bonds are analyzed.And put forward the case analysis of the problem: Xu work to issue bonds price of 100 yuan,the closing price of 94.92 yuan,the issue price is higher than the market price of 5.08%,the issue price has been overestimated suspect.And through the observation and distribution,Xugong convertible bonds on July 18,2014 was more than 100 yuan,8 months during the market performance are lower than the issue price.This issue is not a case of Xugong convertible bonds,is the issue of convertible bonds,China's current issue of convertible bonds are face value issue,due to the number of convertible bonds issued,the current impact is still small,but wait until the scale of growth,pricing The problem is particularly important.Pricing is not easy to damage the interests of the financing side and investors,easy to adversely affect the market.For this problem,this paper is analyzed by three pricing methods,namely B-S model method,binary tree hair and Monte Carlo simulation method.Finally,the pricing of Xugong convertible bonds,according to the three methods can be seen in this paper,the three theoretical prices are less than 100 yuan issue price,which Monte Carlo simulation under the lowest theoretical price,discount 10.72%.B-S model under the theoretical price of the closest,only 7.24% discount,it is only the closing price of the error of 2.33%.Followed by the theoretical price of the binary tree model method,with the issue price of the error of 9.97%,and the closing price of the error of 5.43%.Therefore,according to the above analysis can be learned,to 100 yuan book price issued Xugong convertible bonds are overvalued,B-S model method is most suitable for Xugong convertible bonds pricing.The significance of this paper is that the convertible bond market is not issued when the views and opinions,through the Xugong convertible debt case study to reveal the issue of convertible bonds iss ue pricing,and the use of three common pricing model for comparative analysis The optimal model,that is,the BS model,which has a case demonstration effect in the applicability and practical operation,can improve the promotion.Finally,this paper has the hypothesis and many improvements in the process of using the model pricing,hoping to improve it in the follow-up study.