Generally speaking, when the net value of Grade B falls below 0.25 yuan (convertible bonds are 0.45 yuan), it will trigger downward conversion, and the net value of A and B shares will become 1. This process is that the net value of B is converted from 0.25 yuan to 1 yuan, the net assets remain unchanged, and the share is reduced to 1/4 accordingly. The share of Grade A and Grade B should be maintained at 1: 1, then the share of Grade A 1 yuan net value should be reduced to 1/4. The remaining 3/4 of Grade A is returned to investors in the form of parent fund.
In fact, the discount is a clause in the graded fund contract to protect the interests of A share holders.
"The discount clause first protects the interests of A-share holders. As the net value of share B continues to decline, the leverage is getting bigger and bigger. If it is not discounted, the net value of share B may fall to zero or even fall below, and the principal and interest security of share A cannot be guaranteed. " Secondly, after the discount, the leverage of B share will also be reduced, reducing the risk that the net value of B share holders will accelerate if the market outlook falls further. This means that the graded funds have fallen too much without taking discount measures, and the leverage is getting higher and higher. If the market continues to fall, it will not be able to get the agreed income of A.
In many cases, the main reason why B-class holders will suffer huge losses is that the daily limit system restricts the price of B-class from falling with the parent fund, resulting in a high distorted premium, which leads to a higher and higher passive premium even exceeding100%-at this time, it is very dangerous.
"The original price followed the net value. Under reasonable circumstances, a stable discount or premium should be maintained, and the premium is getting higher and higher when it approaches the discount. The rapid decline in net worth during the plunge may lead to the price failing to keep up with the decline in net worth. When it is close to falling, the leverage is about 5 times, that is to say, if the underlying index falls more than 2%, it will fall more than 10%. However, due to the limit of the daily limit, it cannot fall more than 10%, resulting in higher and higher passive premium, which eventually leads to a premium exceeding 100%. "
For another example, suppose that the net value of a certain grade B is 654.38+ 10,000, the market price becomes 200,000 after a premium of 654.38+000%, and the discounted net value becomes 654.38+0, but the assets are still 654.38+ 10,000. At this time, due to the loss of leverage by 5 times, there is only a premium of 20% at most, that is, the market price becomes 654.38+0.2 million. Therefore, after the discount, the loss of investors will reach 40%.