The Price Determinants of Contingent Convertible Bonds

Zeitsch, Peter J.; Davis, Tom P.

doi:10.2139/ssrn.3668324

Cited by 1 publication

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“…Further, the description of the specific lead–lag relationship of financial sequences is insufficient. Moreover, studies related to convertible bonds have focused on their pricing (Ammann et al, 2008; Batten et al, 2014; Chambers & Lu, 2007; P. Gong et al, 2006; Qiu & Zhang, 2013; Yang et al, 2018; Zeitsch & Davis, 2021), with little literature examining their price discovery capabilities. Therefore, this paper discusses the price discovery of convertible bonds in detail from the perspective of their option properties in conjunction with the trading system.…”

Section: Literature Reviewmentioning

confidence: 99%

Option features and price discovery in convertible bonds

Jin

Yuan

et al. 2022

Journal of Futures Markets

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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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