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In this paper, we investigate whether the option features in convertible bonds lead to price discovery. On the basis of minute-level data from January 2019 to December 2021, we find that the convertible bond market contributes to the price discovery of the stock market by using the thermal optimal path method, and that the option features in convertible bonds are an important factor affecting the price discovery ability. Regression analysis shows that the effect of option features remains significant after controlling for a range of variables, such as the size of the convertible bond, the premium rate, information shock, and volatility. In addition, we further explore the impact of the difference in trading regimes between the convertible bond market and the equity market on price discovery.

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In this paper, we analyze the role that trades and quotes play in price discovery. Based on tick-level data for CSI 300 stock index futures, we find that the contribution of quotes to price discovery does not differ from trades at low resolutions, but dominates at high resolutions. This difference is influenced by spreads and volume. Further analysis reveals that the intraday price contribution of quotes and trades is trending downward, up to 31% in the first half-hour. The adverse selection and liquidity supply cost components of spreads significantly contribute to and dampen the difference in intraday contribution, respectively.

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