Convertible bond pricing model with regime switching in the fractional Brownian motion environment.

Convertible bond is a compound derivative security involving bond, stock and option. Its pricing has always been one of the hot issues in financial mathematics. In this paper, a variety of stock data were used as samples, the long-term dependence and no-constant volatility of stock price was considered, the stock price model with regime switching was established in the fractional Brownian motion environment, the actuarial method and Monte Carlo simulation algorithm were used to price the convertible bond, the market data of Shanghai Bank Securities and Shanghai Bank convertible bond were used for empirical analysis. The empirical results show that the stock price model with regime switching in fractional Brownian motion environment is more suitable for the actual financial market. [ABSTRACT FROM AUTHOR]