Convertible bonds, also known as convertible corporate bonds, originated from the United States 1843. Refers to the corporate bonds issued by the issuer in accordance with legal procedures and can be converted into shares within a certain period of time according to the agreed conditions. That is to say, convertible bonds, as a kind of corporate bonds, investors have the right to convert them into a certain number of common shares of bond issuing companies (hereinafter referred to as benchmark shares) according to a certain proportion and corresponding conditions within the prescribed time limit. Therefore, convertible bonds are bonds with rights, which not only contain the characteristics of ordinary bonds, but also have a series of elements such as face value, interest rate and term. It also includes the characteristics of equity, which can be converted into benchmark stocks under certain conditions; At the same time, it also has the derivative characteristics of benchmark stocks.

Second, the risk of convertible bonds.

Although convertible bonds are bonds, they also have risks, including interest rate risk, stock price fluctuation risk and market risk.

1. Interest rate risk: There is interest rate risk in convertible bonds, and the value of convertible bonds fund decreases with the decrease of interest rate.

2. Risk of stock price fluctuation: Convertible bond funds include stock index options, which may be affected by stock market price fluctuation. When the stock price soared, the price of convertible bonds rose accordingly; When the stock price falls, the price of convertible bonds will also fall.

3. Market risk: There are not many types and quantities of convertible bonds in China, and the liquidity is not very high, which will lead to the failure to smoothly convert convertible bonds funds and cause risks.

Investment value:

1. As a hybrid security, the value of convertible bonds is affected by many aspects. The investment value of convertible bonds mainly lies in the value of the bonds themselves and the conversion value. The value of the bond itself is the guaranteed income of the convertible bond, which depends on the comparison between coupon rate and the market interest rate and the face value of the bond. Because the interest income of convertible bonds is fixed, the value of bonds can be determined by cash flow discount method, and the key to its valuation is to determine the discount rate. The conversion value is also called call option value, which gives investors the right to convert the benchmark stock into the benchmark stock when the benchmark stock rises to a certain price, which is reflected in the conversion income of convertible bonds.

2. The value depends on the comparison between the conversion price and the benchmark stock market price, as well as the company's future profitability and development prospects. Generally, the conversion value adopts the binary tree pricing method, that is, first, based on the issue date, the possible price and probability of the benchmark stock on the start date of conversion are simulated, then the option value at various possible prices is determined, and finally the expected value of the option value is calculated and discounted.