Convertible bond is the abbreviation of convertible corporate bond, which is a special corporate bond that can be converted into common stock at a specific time and under specific conditions. Convertible bonds have the characteristics of both creditor's rights and equity.
Convertible bonds are bonds that bondholders can convert into common shares of the company at the agreed price at the time of issuance. If the bondholders do not want to convert shares, they can continue to hold the bonds until the repayment period expires to collect the principal and interest, or they can be sold and realized in the circulation market.
If the holder is optimistic about the appreciation potential of the issuing company's shares, he may exercise the right to convert the bonds into shares at a predetermined conversion price after the grace period, and the issuing company shall not refuse. The interest rate of this bond is generally lower than that of ordinary companies, and the issuance of convertible bonds by enterprises can reduce the financing cost. The holder of convertible bonds also has the right to sell the bonds back to the issuer under certain conditions, and the issuer also has the right to redeem the bonds under certain conditions.
Convertible bond trading rules:
1. Pricing: The theoretical value of convertible bonds is the sum of pure bond value and complex option value. The influencing factors mainly include the agreed share price, conversion price, government, convertible bond size and other pure bond values can be converted by bond discount, and the complex option value of future cash flow calculation can be determined by quantitative methods such as stochastic simulation. The relationship between the theoretical value of convertible bonds and the conversion value of the inheritance stand is that when the stock price falls, the price of convertible bonds is close to the pure debt value.
2. Transaction method: Convertible bonds are traded in T+0 mode. For entrustment, trading, custody, sub-custody, market disclosure and trading time, refer to A shares. The trading will be terminated ten trading days before the end of the conversion period, and the exchange will make an announcement one week before the termination of the trading. Sub-custody can refer to the trading rules of A shares.
Convertible bonds have the advantages of both bonds and stocks, and are very attractive to investors and issuing companies. The selling price of convertible bonds consists of two parts:
First, the present value of bond principal and interest converted at market interest rate;
The second is the value of conversion right. The reason why the share conversion is valuable is that when the share price rises, the creditor can convert it into shares according to the original conversion ratio, thus obtaining the benefits of stock appreciation.