Research Article | OPEN ACCESS
An Amended Trinomial Tree Model Based on China Convertible Bonds Market
Youzhi Zeng
Graduate School of Beijing Wuzi University, 101149, Beijing, China
Research Journal of Applied Sciences, Engineering and Technology 2013 12:3350-3353
Received: July 26, 2012 | Accepted: September 08, 2012 | Published: April 10, 2013
Abstract
With the actual data in China convertible bonds market, the author tries to derive the new parameter relationship which reflects the law of price movement of the underlying stock in China and replaces the assumption of the traditional trinomial model and derive an amended trinomial tree model based on the new parameter relationship, promoting the development of pricing models as well as the convertible bond in China. The traditional trinomial tree model has a higher pricing efficiency than other traditional pricing models. However, its assumption on the movement law of the underlying stock price of convertible bonds is not suitable for China, which would loss its pricing efficiency in China convertible bonds market.
Keywords:
Pricing efficiency, the amended trinomial tree model, the convertible bond, the traditional trinomial model,
Competing interests
The authors have no competing interests.
Open Access Policy
This article is distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license, and indicate if changes were made.
Copyright
The authors have no competing interests.
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ISSN (Online): 2040-7467
ISSN (Print): 2040-7459 |
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