A Study on the Scope Definition of Convertible Bond Issuing

The hybrid nature of convertible bond and the uncertainty of firm' s production status make convertible bond finance more uncertain, and the uncertainty induces further consequences. The different consequences affect the establishment of capital structure in the corporation's financing decision. So it is necessary to define the issuing scope of convertible bond. Wholly converted and resell are two extreme results of convertible bond financing under the very good production status and very bad production status respectively. These two extreme results can determine the upper limit and the lower limit of the convertible bond issuing scope. The optimal capital structure that is wholly converted is used as the upper limit of convertible bond issuing scope, and the optimal capital structure under resell is used as the lower limit. So the convertible bond issuing scope can be defined. At last, the genetic algorithm based on random simulation is used to solve the model and examples are given to explain the validity of the algorithm.