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

2021 ◽  
Vol 3 (6) ◽  
Author(s):  
Zhang Heng ◽  
Yuyang Zhao ◽  
Qiguang An
Keyword(s):  
Credit Rating ◽  
Market Price ◽  
Convertible Bonds ◽  
Bond Market ◽  
Convertible Bond ◽  
Average Deviation ◽  
Healthy Development ◽  
Credit Risks ◽  
Deviation Rate ◽  
The Impact

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.

scholarly journals The Analysis of Chinese Convertible Bond Market

2020 ◽  
Vol 6 (2) ◽  
pp. p104
Author(s):  
Yuxin Tian ◽  
Jun Chen
Keyword(s):  
Portfolio Management ◽  
Convertible Bonds ◽  
Bond Market ◽  
Comprehensive Analysis ◽  
Convertible Bond ◽  
Historical Evolution ◽  
Chinese Market ◽  
Valuation Model ◽  
Black Scholes Model ◽  
Black Scholes

Convertible bond is a type of hybrid security with both bond- and stock-like features. The Chinese market of convertible bonds has developed dramatically during the last decade. This paper will conduct a comprehensive analysis of this market. Firstly, a brief introduction of convertible bond and the historical evolution of this market in China is presented, then we analyze various investment risks related to convertible bonds. Next, this paper proposes the basic valuation model for convertible bonds, which is the Black-Scholes model and modifies it by taking the delusion effect of conversion into account, leading to the Gailai-Schneller model. In addition, the differences of the outcomes obtained by these two models are compared and analyzed based on the pricing of Shanghai Electric convertible bond. In the sixth part, this paper mainly explains two types of applications of convertible bonds in portfolio management. In the end, several problems existing in Chinese convertible market as well as some suggestions for solving them are discussed.

scholarly journals Pricing Convertible Bonds with Credit Risk under Regime Switching and Numerical Solutions

2014 ◽  
Vol 2014 ◽  
pp. 1-13
Author(s):  
Wei-Guo Zhang ◽  
Ping-Kang Liao
Keyword(s):  
Credit Risk ◽  
Regime Switching ◽  
Numerical Solutions ◽  
Dilution Effect ◽  
Convertible Bonds ◽  
Bond Pricing ◽  
Convertible Bond ◽  
Pricing Model ◽  
Black Scholes ◽  
The Impact

This paper discusses the convertible bonds pricing problem with regime switching and credit risk in the convertible bond market. We derive a Black-Scholes-type partial differential equation of convertible bonds and propose a convertible bond pricing model with boundary conditions. We explore the impact of dilution effect and debt leverage on the value of the convertible bond and also give an adjustment method. Furthermore, we present two numerical solutions for the convertible bond pricing model and prove their consistency. Finally, the pricing results by comparing the finite difference method with the trinomial tree show that the strength of the effect of regime switching on the convertible bond depends on the generator matrix or the regime switching strength.

scholarly journals The Impact of Financial Constraints on the Convertible Bond Announcement Returns

Economies ◽  
2019 ◽  
Vol 7 (2) ◽  
pp. 32 ◽  
Author(s):  
Chong-Chuo Chang ◽  
Tai-Yung Kam ◽  
Chih-Chung Chien ◽  
Wan Su
Keyword(s):  
Financial Constraints ◽  
Positive Impact ◽  
Cash Flows ◽  
Convertible Bonds ◽  
Convertible Bond ◽  
Short And Long Term ◽  
Long Term Performance ◽  
Term Performance ◽  
The Impact

As of now, very few research studies have examined the effects of financial constraints on the short- and long-term performances of companies after their announcement of convertible bonds. Due to asymmetric information, previous studies consider issuance of convertible bonds as negative news. As a result, the short- and long-term performances of companies generally decline after their convertible bond announcement. This study argues that when companies have investment plans, they are expected to have higher future cash flows. They will become increasingly more valuable regardless of the fact that they raise funds through the issue of convertible bonds (due to financial constraints), positively affecting the performance of companies. The results indicate that financial constraints have no effect on short-term performance, but did have a significantly positive impact on the long-term performance of companies after their issuance of convertible bonds.

scholarly journals Does Increased Competition Affect Credit Ratings? A Reexamination of the Effect of Fitch’s Market Share on Credit Ratings in the Corporate Bond Market

2015 ◽  
Vol 50 (5) ◽  
pp. 1011-1035 ◽  
Author(s):  
Kee-Hong Bae ◽  
Jun-Koo Kang ◽  
Jin Wang
Keyword(s):  
Market Share ◽  
Conflict Of Interest ◽  
Credit Rating ◽  
Credit Ratings ◽  
Bond Market ◽  
Corporate Bond ◽  
Industry Effects ◽  
Corporate Bond Market ◽  
Rating Agencies ◽  
The Impact

AbstractWe examine two competing views regarding the impact of competition among credit rating agencies on rating quality: the view that rating agencies do not sacrifice their reputation by inflating firm ratings, and the view that competition among rating agencies arising from the conflict of interest inherent in an “issuer pay” model creates pressure to inflate ratings. Using Fitch’s market share as a measure of competition among rating agencies and controlling for the endogeneity problem caused by unobservable industry effects, we find no relation between Fitch’s market share and ratings, suggesting that competition does not lead to rating inflation.

Role of Credit Rating in determining Capital structure: Evidence from Non-Financial sector of Pakistan

2020 ◽  
Vol 38 (3) ◽  
Author(s):  
Shoaib Ali ◽  
Imran Yousaf ◽  
Muhammad Naveed
Keyword(s):  
Capital Structure ◽  
Credit Rating ◽  
Least Square ◽  
Annual Data ◽  
Leverage Ratio ◽  
Financial Decisions ◽  
Financial Firms ◽  
High Level ◽  
The Impact ◽  
The Capital Structure

This paper aims to examine the impact of external credit ratings on the financial decisions of the firms in Pakistan.  This study uses the annual data of 70 non-financial firms for the period 2012-2018. It uses ordinary least square (OLS) to estimate the impact of credit rating on capital structure. The results show that rated firm has a high level of leverage. Moreover, Profitability and tanagability are also found to be a significantly negative determinant of the capital structure, whereas, size of the firm has a significant positive relationship with the capital structure of the firm.  Besides, there exists a non-linear relationship between the credit rating and the capital structure. The rated firms have higher leverage as compared to the non-rated firms. The high and low rated firms have a low level of leverage, while mid rated firms have a higher leverage ratio. The finding of the study have practical implications for the manager; they can have easier access to the financial market by just having a credit rating no matter high or low. Policymakers must stress upon the rating agencies to keep improving themselves as their rating severs as the measure to judge the creditworthiness of the firm by both the investors and management as well.

Health Literacy of Parents and Carers in a Regional Community: A Cross-Sectional Study

2021 ◽  
pp. 0272684X2110225
Author(s):  
Matthew J. Leach ◽  
Sue Nichols ◽  
Sven Trenholm ◽  
Martin Jones
Keyword(s):  
Health Literacy ◽  
Primary School ◽  
Tertiary Education ◽  
Functional Health ◽  
Cross Sectional ◽  
Healthy Development ◽  
School Aged Children ◽  
Australian Community ◽  
Literacy Scores ◽  
The Impact

Background Supporting a child’s healthy development is determined, in part, by a parent’s ability to seek, access, interpret and effectively utilize health information. This aspect of parenting draws on a set of skills referred to as health literacy. Objective To assess the level of health literacy among parents/carers in a regional South Australian community. Methods Parents/carers of primary school-aged children, residing in Whyalla, South Australia, were invited to complete the 13-item All Aspects of Health Literacy Survey. Results 155 parents/carers completed the survey (79% mothers). Most participants were English-speaking (97%), employed (62%) and had 2–3 children (62%), with 52% completing tertiary education. Median total health literacy scores were mostly in the moderate-high range (median 27, IQR 26,27), as were critical health literacy scores (median 7, IQR 6,8). Higher scores were reported for functional health literacy (median 8, IQR 7,9), communicative health literacy (median 9, IQR 8,9) and empowerment health literacy (median 4, IQR 3,5). Conclusions Our findings reveal modest levels of health literacy among a sample of parents/carers of primary school-aged children in a regional South Australian community. Further work is needed to understand the differential effect of parental health literacy on child health outcomes, and the types of strategies that may mitigate the impact of these barriers on a child’s healthy development.

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