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研究生:連柏綺
研究生(外文):Po-Chi Lien
論文名稱:ALatticeModelforPricingTaiwaneseConvertibleBonds
論文名稱(外文):A Lattice Model for Pricing Taiwanese Convertible Bonds
指導教授:王之彥王之彥引用關係
指導教授(外文):Jr-Yan Wang
學位類別:碩士
校院名稱:國立臺灣科技大學
系所名稱:財務金融研究所
學門:商業及管理學門
學類:財務金融學類
論文種類:學術論文
畢業學年度:96
語文別:英文
論文頁數:51
中文關鍵詞:可轉換公司債巴黎式選擇權重設
外文關鍵詞:convertible bondsParisian-style-callreset
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The contract of a Taiwanese convertible bond is much more complicated than that
of a traditional convertible bond. There are two main reasons. First, except the general call provision, once the stock price is higher than the conversion price multiplying a ratio consecutive for a period, the call option also can be triggered, and the corporation can redeem the convertible bond for a certain price. This kind of Parisian-style call option is sure a path-dependent option. Second, the conversion price has one to two chances
to be reset within each year until maturity. Whenever at the reset day, the conversion price could be reset downward according to arithmetic average of the stock prices of several periods. The reset option is a path-dependent option as well. Moreover, because the conversion price could be reset, and the trigger level of the Parisian-style call option varies according to the conversion price, the possible interaction between these two path-dependent options further increases the difficulty of pricing a Taiwanese convertible bond. Because the contract of a Taiwanese convertible bond is unique in the world, the existing pricing convertible bond models can not be applied to pricing it. In this thesis, an algorism is proposed and can be combined into the traditional binomial tree convertible bond pricing model. This model is the first one able to price Taiwanese convertible bond precisely. According to this pricing model, I find that the market prices of the Taiwanese convertible bonds are almost undervalued universally. The reason is presumable to be the lack of a proper pricing model like the model in this thesis to value these complicated contracts. This thesis proposes a reasonable and doable lattice pricing model for investors and originators to understand the real value of a Taiwanese convertible bond.
The contract of a Taiwanese convertible bond is much more complicated than that
of a traditional convertible bond. There are two main reasons. First, except the general call provision, once the stock price is higher than the conversion price multiplying a ratio consecutive for a period, the call option also can be triggered, and the corporation can redeem the convertible bond for a certain price. This kind of Parisian-style call option is sure a path-dependent option. Second, the conversion price has one to two chances
to be reset within each year until maturity. Whenever at the reset day, the conversion price could be reset downward according to arithmetic average of the stock prices of several periods. The reset option is a path-dependent option as well. Moreover, because the conversion price could be reset, and the trigger level of the Parisian-style call option varies according to the conversion price, the possible interaction between these two path-dependent options further increases the difficulty of pricing a Taiwanese convertible bond. Because the contract of a Taiwanese convertible bond is unique in the world, the existing pricing convertible bond models can not be applied to pricing it. In this thesis, an algorism is proposed and can be combined into the traditional binomial tree convertible bond pricing model. This model is the first one able to price Taiwanese convertible bond precisely. According to this pricing model, I find that the market prices of the Taiwanese convertible bonds are almost undervalued universally. The reason is presumable to be the lack of a proper pricing model like the model in this thesis to value these complicated contracts. This thesis proposes a reasonable and doable lattice pricing model for investors and originators to understand the real value of a Taiwanese convertible bond.
Contents
Contents II
List of Tables III
List of Figures V
1 Introduction 1
2 The Pricing Model 3
2.1 The Contract of Taiwanese Convertible Bonds . . . . . . . . . . . . . . . . 3
2.2 Basic Pricing Model Subject to the Default risk . . . . . . . . . . . . . . . 4
2.3 The Information Set in My Model . . . . . . . . . . . . . . . . . . . . . . 6
2.4 Solving the Parisian-style Call Provision . . . . . . . . . . . . . . . . . . . 7
2.5 Solving the Reset Feature of the Conversion Price . . . . . . . . . . . . . . 11
2.5.1 Calculating Average Stock Prices . . . . . . . . . . . . . . . . . . . 11
2.5.2 The Conditional Probability of Each Path Reaching Nodes at Reset
Dates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.6 Transmission process of the probabilities of possible conversion price. . . . 15
2.6.1 General case . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.6.2 The Day After the Reset Day . . . . . . . . . . . . . . . . . . . . . 15
2.7 Deciding the Payoff of the Terminal Nodes . . . . . . . . . . . . . . . . . . 17
2.8 Backward Induction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
2.8.1 General Rule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
2.8.2 Deal with Parisian-style call and put, and decide convertible bond
values . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.8.3 The Special Rule for the Reset Day . . . . . . . . . . . . . . . . . . 18
I
3 Numerical Result 21
4 Conclusion 32
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Bernard. C., O. L. Courtois, and F. Q. Pinon, 2005, A New Procedure for Pricing
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