The Case Study Of Convertible Bond Pricing Based On Black-scholes Model

With the continuous improvement of China's financial market,bond financing gets developing correspondingly.As an important direct financing tool,bonds provide a large amount of external funds for Chinese economic construction,What's more,its financing scale has exceeded the size of the stock market right now and keep expansion.As a kind of bond,convertible bonds attract more and more attention from the market.Convertible bonds refer to bonds that can be converted into corresponding stocks according to the proportion and price agreed in advance under certain conditions.Compared with ordinary corporate bonds,the option nature of convertible bonds enables all participants in the bond market to benefit from the changes in stock prices.The dual option feature of convertible bonds limits the risks and returns of investors and issuers to a certain range,which can be regarded as an efficient financing method.However,China's convertible bond market started relatively late,lacking perfect market system,unified pricing standard,diversified investment products and mature investment groups.Among them,pricing mechanism,as a key issue,is worth further discussion.Taking the pricing of convertible bond as the entry point,this paper divides the value of a convertible bond into the value of bond and the value of options.The key point of pricing is the value of options.Black-Scholes model is used to calculate the value.In order to make the research more intuitive and concrete,this dissertation use GoerTek convertible bond as a specific case of empirical research.Then,selecting 113 time nodes during the term of debt to calculate the theoretical value of the not considering terms correction and the considering terms correction separately.After combining with the actual prices,it draws a conclusion about the pricing efficiency of Black-Scholes option pricing model in our country.The case study of GoerTek convertible bond shows that within a certain error range,the theoretical value calculated by the Black-Scholes model is not far from the actual price,regardless of whether the modification of terms is considered,indicating that the model has certain applicability to the pricing of convertible bond market of China.The error between the theoretical value and the actual price of a convertible bond considering the modification of terms is smaller than that of the theoretical value of a convertible bond not considering themodification of terms,indicating that the value of the remaining clauses of a convertible bond cannot be ignored.Based on the deviation analysis of the case,the possible problems in the pricing of convertible bonds in China are discussed.In view of the specific problems of the pricing of convertible bonds in China,this paper believes that the threshold of entry should be lowered appropriately,the market scale should be expanded,and so does the categories of investments to further improve the convertible bond market in China.At the same time,the relationship between fluctuation and terms may need to be considered to optimize the applicability of Black-Scholes model.