Research On Exchangeable Bond Financing Risk Management Based On Pricing And Terms

Baosteel Group on December 8,2014 issued an exchange bond issuance announcement and exchange bond prospectus,with its holdings of Xinhua Insurance165 million A shares pledged,the issuance of exchangeable bonds,the issuance of bonds is 40 Billion yuan.December 24,2014,Baosteel Group convertible bonds publicly traded on the Shanghai Stock Exchange.Baosteel Group exchangeable bonds became the first publicly traded bonds in China.Exchangeable bonds are a new derivative financial instrument that is a corporate bond that can convert bonds into other corporate shares that are different from the bond issuer,subject to certain conditions.Simply put,exchangeable bonds can be called "bonds that can be exchanged for shares of other companies",referred to as "exchangeable bonds",the English name is Exchangeable bond(EB).Exchangeable bonds mainly have the following three functions: First,low-cost financing tools,the second is the issuance of the company’s premium to reduce the holdings of the company’s stock an effective tool,the third is to increase the assets of the company to increase the liquidity of equity assets of financial instruments.This paper hopes to establish a relatively complete research framework by drawing on the theoretical research and practical experience of exchangeable bonds at home and abroad,and comprehensively analyze the basic characteristics,development situation and financing risk of exchangeable bonds,and analyze the exchangeable bond pricing model And the terms of the design,for theoretical research and practical operation to provide valuable advice.The purpose of this paper is to provide more and more valuable theoretical and practical research to further enhance the depth and breadth of research on China’s exchangeable bonds.The paper first analyzes the definition and characteristics of exchangeable bonds and compares them with convertible bonds,and reviews the development process of exchangeable bonds and its practice in China.Secondly,the pricing model of exchangeable bonds is studied,and the different characteristics of several options models and the suitability of the pricing of exchangeable bonds are analyzed.Then,the paper takes Baosteel exchangeable bonds as the research object,collects the data,uses the Black-Scholes option pricing formula and the binary tree pricing model to carry on the quantitative calculation research,calculates its theoretical value,and finds out the main factors that influence the exchangeable bond value.Finally,it analyzes the impact of different terms on the returns and risks of issuers and investors,and points out that the design of the terms is a key factor in the success of the exchange of bonds.According to the problems in the design of the articles on exchangeable bonds issued in China,the paper puts forward the improvement methods and how to design reasonable exchangeable bond terms to control the risk of issuer ’s financing through exchangeable bonds.