The Application Research On Pricing Of Convertible Bonds Based On B-S Model

Convertible bond is a relatively complicated new type of financial derivatives,which means that the issuers legally entitle investors who hold the bond to convert the underlying stocks according to the agreed conditions within a certain period of time.Compared to other financial products,convertible bond has the unique advantages.As a financial product,the market is mainly concerned about the pricing of convertible bond.The reasonable pricing of convertible bond is of great significance to investors' investment decisions,successful financing of issuing companies,and the healthy development of China's capital market.The research route of this paper mainly is as followings.(1)Finding the problem: With the tightening of the targeted additional shares issuance,the number of convertible bond in 2017 has soared,and convertible bond financing has become an alternative.Then the reasonable pricing of convertible bond is a main concern of the market.The convertible bond has became sought after by the market.However,after the November 2017,more convertible bond's price will break on the first day of listing.Therefore,this paper intends to explore the pricing of China's convertible bond.(2)Document sorting: Through reading historical documents to explore the pricing models recognized by scholars,and combined with the current development of China's convertible bond market,this paper focus on the applicability analysis and model expansion.(3)Empirical research: In-depth analysis of the specific convertible bond case,use the B-S model to calculate the theoretical value of the convertible bond without considering the influence of the clause and with considering the influence of the clause.and find the error by comparing the actual issue price.Finally try to explain the break on the first day of listing.This paper expounds the characteristics and value composition of China's convertible bond,discusses the applicability of the pricing methods of convertible bond,focuses on several key aspects of model implementation and extends the traditional B-S model.And then based on these theories,the fifth chapter selects 20 sample convertible bond for empirical research,and takes GAC convertible bond as a specific example.The first day of listing is selected as the evaluation benchmark date,and the B-S model before and after expansion is used to calculate the theoretical value of convertible bond.The actual issue price is found in the error,so as to analyze the validity of the model,and explain the first day of the listing of the convertible bond,and provide investment reference.The innovation of this paper is that this paper takes the China's convertible bond pricing as the main research focus,introduces the three models of B-S model,binary tree method and Monte Carlo method and try to find the model which is suitable for China's convertible bond.In the pricing process,in order to enhance the accuracy of the results,this paper chooses the GARCH model to correct the volatility.In addition,as for the choice of risk-free interest rate and discount rate,the bond yield curve given by Chinabond is used to try to reduce the calculation error as much as possible by more authoritative and standardized data.What's more,in the empirical research process,the value of the convertible bond was analyzed at the time node,the first day of the listing,to explain the discovery of the first day of listing.