A Case Study Of The Impact Of The Embedding Of Downward Correction Clauses On The Pricing Of Gree Convertible Bonds

Convertible bond is a complex financial product with the nature of equity,creditor’s right and option.Investors can flexibly hold convertible bonds or convert shares after investment.The first convertible bond was born in the United States in 1843.Bao’an convertible bond issued in 1992 is the first convertible bond in China.After nearly 30 years of development,China’s convertible bond market has gradually matured.At present,the research on convertible bonds mainly focuses on the pricing,financing and investment of convertible bonds,but the impact of clause design on the pricing of convertible bonds is not sufficient,and there are few studies on downward revision clauses.This paper will try to analyze the impact of the downward revision clause on the pricing of Gree convertible bonds,summarize the reasons for the failure of Gree convertible bonds to shares,and hope to provide some theoretical suggestions for future issuing companies.This paper selects the Gree convertible bonds that have been closed,and analyzes the impact of the downward revision clause on the pricing of Gree convertible bonds.This paper mainly studies the impact of the downward revision clause on the pricing of Gree convertible bonds through five chapters.The first chapter is the introduction.In this chapter,it focuses on the background of the topic selection,and puts forward the research purpose and significance combined with the development of convertible bonds in China’s market.Then it expounds the domestic and foreign research related to the pricing of convertible bonds.Finally,the research method of this paper is explained.The second chapter introduces the concepts and theories used in this paper,focuses on the basic terms,value composition and related theories of convertible bonds,describes the definitions and characteristics of the four methods of convertible bond pricing,and summarizes their advantages and disadvantages.The third chapter is a case introduction.In this chapter,we describe the issuance and market performance of Gree convertible bonds,analy ze the implementation of various terms of Gree convertible bonds,and then sort out the historical situation and main scenarios of the downward revision of Gree convertible bonds.Sort out the main scenarios and explain the problems existing in Gree convertible bonds.The fourth chapter is an empirical analysis,which mainly analyzes the impact of the downward revision clause on the pricing of Gree convertible bonds.Through Monte Carlo simulation of the stock price path,according to the trigger conditions of convertible bonds,the path is analyzed in detail,and the theoretical price of the model considering the downward correction clause is calculated.It is found that the pricing error between the theory and the actual market can have a significant impact on the market price.The fifth chapter is the optimization strategy and conclusions and suggestions.This chapter mainly optimizes the implementation of the downward amendment clause of Gree convertible bonds,and puts forward some practical suggestions.