Abstract: With the help of American binary calls and up-and-out calls,in the Black Scholes framework,according to the risk-neutral valuation principal,this paper completely decomposes Coupon bearing Callable Convertible Bonds(CCCB)into the port folio of seven kinds of simple securities.At the same time,based on the existing valuation fo rmulae for these simple securities,the valuation formula for CCCB is derived. Furthermore,the valuation for mula for the effective value of coupons of CCCB is also worked out.Compared with the existing numerical procedures,this method can not only give a lot newinsight of the value composition of CCCB,but also greatly speed up the valuation of CCCB.

Key words: coupon-bearing callable convertible bonds, equivalent decomposition method, up-and-out call, American binary calls, derivative pricing