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

At present,further research and exploration on credit risks are being carried out in the global field,and increasingly profound modem 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 Femandes(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 1han 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.

The valuation of multi-counterparties CDS with credit rating migration

In this paper,the pricing of a Credit Default Swap(CDS)contract with multiple counterparties is considered.The pricing model takes into account the credit rating migration risk of the reference.It is a new model established under the reduced form framework,where the intensity rates are assumed to have structural styles.We derive from it a non-linear partial differential equation system where both positive and negative correlations of counterparties and the references are considered via a single factor model.Then,an ADI(Alternating Direction Implicit)difference method is used to solve the partial differential equations by iteration.From the numerical results,the comparison of multi-counterparty CDS contract and the standard one are analyzed respectively.Moreover,the impact of default parameters on value of the contracts are discussed.