Research and Case Study of Trinomial Tree Model in Convertible Bonds Under Credit Risk

Zhiheng Chen

doi:10.47297/taposatWSP2633-456936.20220303

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Research and Case Study of Trinomial Tree Model in Convertible Bonds Under Credit Risk

Volume 3, Issue 3

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Research and Case Study of Trinomial Tree Model in Convertible Bonds Under Credit Risk
Research and Case Study of Trinomial Tree Model in Convertible Bonds Under Credit Risk
Sichuan University,Sichuan,Chengdu,P.R.China
Vol. 3, Issue 3, Pages: 183-200(2022)
Published： 2022 ，
DOI：10.47297/taposatWSP2633-456936.20220303
Accepted：

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ZHIHENG CHEN. (2022). Research and Case Study of Trinomial Tree Model in Convertible Bonds Under Credit Risk. Theory and Practice of Science and Technology, 3(3), 183-200..
DOI：

ZHIHENG CHEN. (2022). Research and Case Study of Trinomial Tree Model in Convertible Bonds Under Credit Risk. Theory and Practice of Science and Technology, 3(3), 183-200.. DOI： 10.47297/taposatWSP2633-456936.20220303.

摘要

Abstract

This paper studies the convertible bonds pricing with credit risk

under China financial market. A trinomial tree model of convertible bonds pricing is established

assuming the underlying stock price is not zero at the time when default happens. It takes into count that the default intensity follows a double exponential jump process and measures it. It also discusses the impact of additional clauses on the value of convertible bonds at different stages and how to handle them. Based on the real market convertible bond data for empirical analysis

this paper predicts the first day issue price of convertible bonds

and comparesestablished trinomial tree model with B-S model and Monte Carlo model.

关键词

Keywords

Convertible bonds Transient default risk exposure Trinomial tree Double exponential jump

references

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