Pricing Convertible Bond in Uncertain Financial Market

This paper is devoted to evaluating the convertible bonds within the framework of uncertainty theory. Under the assumption that the underlying stock price follows an uncertain differential equation driven by Liu process, the price formulas of convertible bonds and the callable convertible bonds are derived by using the method of uncertain calculus. Finally, two numerical examples are discussed.

Application of Nonarbitrage Pricing Model and Finite Element Numerical Solution in the Value of Convertible Bonds in the Stock Market

Because of its creditor’s rights, equity, and options, convertible bonds have been developed rapidly since its emergence and have become one of the main tools in the financial market. One of the core problems of convertible bonds is pricing. The research on the pricing model of convertible bonds in China is relatively late. Most of them use foreign technologies, but they are quite different from the actual situation in China, and most of the models are characterized by a single factor. Therefore, this paper puts forward the nonarbitrage pricing model in the stock market and the application of the finite element numerical solution in the value of convertible bonds. The biggest innovation of this paper is to design a combined pricing model by using the model of nonarbitrage pricing theory and finite element numerical solution. The model combines the advantages of the nonarbitrage pricing theory and finite element numerical solution, and through the design of this paper, the model effectively improves the calculation accuracy and is suitable for most of the current market environment. While improving the comprehensive performance of the pricing model, it also simplifies the calculation methods and steps. In order to further verify the actual effect of the pricing model in this paper, the traditional binary tree model is taken as the experimental contrast object, including the comparative analysis of the market price and the theoretical price of the convertible bond, the comparative experiment of the prediction effect between the model and the binary tree model, and the analysis of the relative price error of the convertible bond. The results show that the comprehensive performance of the pricing model in this paper is significantly better than the traditional binary tree model. This study has achieved ideal results and can be widely recommended.

Research on the Pricing of Convertible bonds in China---Migration risk based on credit rating

At present, further research and exploration on credit risks are being carried out in the global field, and increasingly profound modern credit risks are exposed to the bond market. This requires that we cannot ignore the impact of credit rating migration risk on bond pricing, so as to adapt to the sustainable and healthy development of the bond market under the new normal of China's economy. The innovation point of this paper is to try to analyze the pricing of Convertible bonds in China from the perspective of credit rating migration risk. Tsiveriotis and Fernandes(1998) model is selected, and the credit risk in the model is assumed to be caused by the credit rating migration risk, and the credit spread is used to measure the credit rating migration risk. The research conclusion of this paper is as follows: First, it is valid to consider the risk of credit rating migration in the TF(1998) model. The market price of convertible bonds is on average 1.22% higher than the theoretical value of the model. In general, the theoretical value obtained from the model has little deviation from the market price, and has a good fitting degree. Second, from the Angle of credit rating, the selection of 32 samples of convertible bonds only empirical research shows that the credit rating of AA - convertible bonds average deviation rate is negative, suggest that the credit rating of AA - the phenomenon of convertible bonds value is underestimated, and AAA credit rating to AA, AA +, the average deviation rate of convertible bonds is positive, that credit rating AA (containing AA) more convertible bond value is overrated phenomenon, and the higher the credit rating of the average deviation rate of convertible bond, the greater the overvalued levels. It has certain guiding significance for participants in the convertible bond market.