1. Report Industry Investment Rating No relevant content provided. 2. Core Viewpoints of the Report - In October, the main equity indices and the CSI Convertible Bond Index showed a "V" - shaped trend, with the CSI Convertible Bond Index down 0.11% for the month and up 16.99% year - to - date. The performance of convertible bonds varied by type and style, and the valuation of the convertible bond market reached a high level, with only A+ and A - rated convertible bonds having potential for valuation increase. The difference between market price and theoretical call redemption probability widened, and the timing strategy for the CSI Convertible Bond Index turned to a short - term buy signal. Some convertible bonds' credit risk may have increased marginally, and several investment strategies are recommended [1][2][3][4][5]. 3. Summary by Directory 3.1 Convertible Bond Market Tracking 3.1.1 Convertible Bond Index Tracking - As of October 31, the CSI Convertible Bond Index decreased by 0.11% in October, with a maximum drawdown of 3.15%, and its performance in terms of return - drawdown was relatively weak compared to the Shanghai Composite Index. Structurally, in October, the performance of debt - biased convertible bonds was relatively the best, and all three types of convertible bonds had weaker price changes than their corresponding underlying stocks. Historically, in November from 2018 - 2024, convertible bonds tended to rise, and the balanced convertible bonds had the highest median increase. In October, the performance of convertible bond style indices was significantly differentiated, and historically in November, the double - low and high - dividend styles had relatively high winning rates [12][16][20][22]. 3.1.2 Option Valuation Continues to Soar, Currently Above the 99th Percentile of History - The current valuation of the convertible bond market is at a high level, and the number of undervalued convertible bonds is low. Structurally, only A+ and A - rated convertible bonds have an overall valuation lower than the post - 2022 central level, presenting a structural opportunity. The weighted implied volatility spread of convertible bonds is also above the 99th percentile of history [2][26][31]. 3.1.3 The Expected Difference between Market Price and Theoretical Call Redemption Increases - Through the convertible bond pricing model, the expected probabilities of call redemption, debt repayment, and delisting at the initial point are obtained. In October, the expected debt - repayment probability increased, while the call - redemption and delisting probabilities decreased. The proportion of convertible bonds above 125 yuan continued to rise, but the theoretical call - redemption probability decreased, indicating an increase in the market's sentiment towards call - redemption conversion, and attention should be paid to potential market adjustments [3][37][39]. 3.2 Convertible Bond Strategies 3.2.1 Timing of the CSI Convertible Bond Index, Strategy Turns to Short - Term Buy Signal - A simple timing model using the RSJ and implied volatility spread indicators was constructed. The combined use of these two indicators has a better timing effect. As of the end of October, the strategy turned to a buy signal, but there may be short - term callback risks for the convertible bond index due to high valuation [4][43][51]. 3.2.2 Update of the Rating Prediction Model - A machine - learning algorithm based on multiple factors of convertible bond ratings was used to predict rating changes. The latest Q3 prediction results show that for some convertible bonds, the predicted downgrade probability has increased, and attention should be paid to potential marginal changes in credit risk [5][53][57]. 3.2.3 Convertible Bond Strategy Portfolio - **Option Low - Valuation Strategy**: Although the overall market valuation is high, undervalued convertible bonds can be selected through pricing models. The willow pricing low - valuation strategy has relatively high and stable excess returns and a small maximum drawdown [59][60]. - **Double - Low + Momentum and Other Strategies**: Combining momentum indicators on the basis of the traditional double - low strategy can increase historical returns and reduce the maximum drawdown. High - dividend convertible bonds are also recommended due to their investment value and defensive properties. Historically in November, the willow pricing low - valuation strategy had a relatively high winning rate [63][66]. 3.3 Details of Some Strategy Portfolios - The report provides the details of the willow pricing undervalued portfolio, double - low + momentum portfolio, and dividend + portfolio as of October 31, 2025 [69][70][71].