An Amended Trinomial Tree Model Based on China Convertible Bonds Market

摘要

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.