This paper examines volatility-driven mispricing in China’s Convertible Bond(CB)market by comparing GARCHbased historical volatility with implied volatility.Using market data and contractual features,we examine how r...This paper examines volatility-driven mispricing in China’s Convertible Bond(CB)market by comparing GARCHbased historical volatility with implied volatility.Using market data and contractual features,we examine how redemption policies and conversion-price adjustments affect convertible-bond valuation.Our results show that the embedded option component is systematically undervalued,implying persistent mispricing in China’s CB market.We develop and backtest volatility-based trading strategies and demonstrate that incorporating CBs into traditional portfolios enhances both diversification and risk-adjusted returns.展开更多
文摘This paper examines volatility-driven mispricing in China’s Convertible Bond(CB)market by comparing GARCHbased historical volatility with implied volatility.Using market data and contractual features,we examine how redemption policies and conversion-price adjustments affect convertible-bond valuation.Our results show that the embedded option component is systematically undervalued,implying persistent mispricing in China’s CB market.We develop and backtest volatility-based trading strategies and demonstrate that incorporating CBs into traditional portfolios enhances both diversification and risk-adjusted returns.
