The stock price on calculating date Designed the time point which is equal to CB's left period value function CB_ value=CB_Shanying(t,rf,S1) %Function designed for calculating the value of convertible bond with revise TF98 model %t by YEAR %rf Designed risk-free rate %S1 % Input the initial parameters for Shanying Convertible Bond % CB code: 110567; Stok code: 600567 %Stock's volatility sigma=0.527; % Risk-credit rate rc=0.0098; %Initial converting value per share X=7.31; %Face value of CB F=100; %Converting ratio k=F/X; dt=t/200; %The period spent by every step up=exp(sigma*sqrt(dt)); %The percent of stock price's rise down=1/up; p=(exp(rf*dt)-down)/(up-down); %The probability in the risk-neutral world % The percent of stock price's drop % Call price %Put price Cv=105; Pv=105; TimeConvert_on=0.5; %Time to begin Conversion TimeConvert_off=5; %Time to finish Conversion %Time to begin Call TimeCall_on=1; %Time to finish Call TimeCall_off=5; TimePut 一 on=2; %Time to begin Put %Time to finish Put TimePut 一 off=5; n=200; S=zeros(n,n); V=zeros(n,n); U=zeros(n,n); B=zeros(n,n); S(1,1)=S1; %Steps of the binary tree evaluation %Stock value matrix %CB value matrix % CB's stock part value matrix % CB's bond part value matrix % Initial stock price % Evaluating movements of the stock for i=2:n; for j=1:i; S(j,i)=S(1,1)*down^(j-1)*up^(i-j); end; end; %Calculate the final value of bond considering the compensating rate r1=0.014; %The first year rate of the bond 

r2=0.017; r3=0.020; r4=0.023; r5=0.026; Rcomp=0.028; due date %The second year rate %The third year rate % The fourth year rate %The fifth year rate %The compensating rate if doesn't conve 比 the bond on Q= F*exp (5*Rcomp); % Q is equal to face value plus the extra interest, is the cash flow on the bond’s due date if no conversion %Calculate CB value on the terming! for j=1:n if k*S(j,n)>=Q %The converting value is bigger than the cash flow, so exercise the conversion U(j,n)=k*S(j,n); B(j,n)=0; else U(j,n)=0; B(j,n)=Q; %No conversion end; V(j,n)=U(j,n)+B(j,n); end; %Calculate CB's value on every node of binary tree from the back for i=n-1:-1:1 m=5-(n-i)*dt; % m is a time control variable for Convert, Call and Put Clause If (m>=TimeConvert_on) && (m<=TimeConvert_off) % Judge whether the time steps into the converting period flag_convert=1; %In the converting period else flag_convert=0; %Not in the converting period end; if(m>=TimeCall_on)&&(m<=TimeCall_off) %Judge whether the time steps into the call period flag_call=1; % In the Call period else flag call=0; %Not in the Call period end; if(m>=TimePut_on)&&(m<=TimePut_off) %Judge whether the time steps into the put period flag_put=1; %In the Put period else 

flag_put=0; % Not in the Put period end; for j=1:i if flag_convert==1 U(j,i)=exp(-rf*dt)*(p*U(j,i+1)+(1-p)*U(j+l,i+1)); %Deducing backward the stock part with the risk-free rate B(j,i)=exp(-(rf+rc)*dt)*(p*B(j,i+1)+(1-p)*B(j+i,i+1)); % Deducing backward the bond part under credit risk V(j,i)=U(j,i)+B(j,i); else U(j,i)=0; % Stock part is no value in No-conversion period V(j,i)=exp(-(rf+rc)*dt)*(p*V(j,i+1)+(1-p)*V(j+1,i+1)); % Deducing backward CB value under credit risk in No-conversion period B(j,i)=V(j,i); end; if V(j,i)<=k*S(j,i)&&(flag_convert==1) % Stock price is high enough for conversion U(j,i)=k*S(j,i); B(j,i)=0; V(j,i)=U(j,i)+B(j,i); elseif (S(j,i)>=1.25*X)&&(V(j,i)>Cv)&&(flag_call==1); %Satisfy the CALL Clause and exist arbitrage benefit for the company U(j,i)=k*S(j,i); % investors exercise conversion under call pressure B(j,i)=0; V(j,i)=U(j,i)+B(j,i); elseif (S(j,i)<=0.7*X)&&(V(j,i)

end; %Show value of the CB on the initial date CBee value=V(1,1);