Study on Traditional Pricing Models Based on Terms of Convertible Bonds in China

The study has gotten the conclusion that the binary tree model is more suitable for convertible bonds pricing in China by analyzing terms of convertible bonds in China and deducing traditional pricing models of convertible bonds. The characteristics of terms embedded in convertible bonds decide which pricing models will be elected and which model parameters to be estimated. By analyzing terms of convertible bonds in China, get the expressions of terms value, which are called as terminal conditions and boundary conditions and then deduce the traditional pricing models. Based on the above processes, it can be found that the binary tree model use terminal conditions and boundary conditions better.