Application of Two Binomial Tree M odel to the Pricing of Convertible Bond

Journal of South China University of Technology (Natural Science Edition) ›› 2005, Vol. 33 ›› Issue (3): 99-102.

Application of Two Binomial Tree M odel to the Pricing of Convertible Bond

Yang Li-hong Yang Xia

CoIIege of Mathematical Sciences,South China Univ.of Tech.,Guangzhou 510640,Guangdong,China

Received:2004-06-03 Online:2005-03-25 Published:2005-03-25
Contact: 杨立洪(1961-)，男，副教授，主要从事数理金融等的研究 E-mail:malhyang@scut.edu.cn
About author:杨立洪(1961-)，男，副教授，主要从事数理金融等的研究

Abstract

Abstract:

Convertible bond is a new hybrid financial tool, which possesses the characteristics of bond and option and the performances of financing and evading risk. The investigation into the p ricing of convertible bonds is very important to both issuers and investors in p ractice or theory. In this paper, by using the Two Binomial TreeModel and considering the call and put items, the p ricing theory and corresponding p ricing model of convertible bonds is systematically studied through 24 kinds of convertible bonds in China market. The results show that the convertible bonds are significantly underp riced.

Key words: convertible bond, two binomial tree model, pricing

Yang Li-hong Yang Xia. Application of Two Binomial Tree M odel to the Pricing of Convertible Bond[J]. Journal of South China University of Technology (Natural Science Edition), 2005, 33(3): 99-102.

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Application of Two Binomial Tree M odel to the Pricing of Convertible Bond

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