Binomial Tree Model for Convertible Bond Pricing within Equity to Credit Risk Framework
نویسندگان
چکیده
منابع مشابه
Binary Tree Pricing to Convertible Bonds with Credit Risk under Stochastic Interest Rates
and Applied Analysis 3
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We propose a model which can be jointly calibrated to the corporate bond term structure and equity option volatility surface of the same company. Our purpose is to obtain explicit bond and equity option pricing formulas that can be calibrated to find a risk neutral model that matches a set of observed market prices. This risk neutral model can then be used to price more exotic, illiquid or over...
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We study the contemporaneous and intertemporal partial relation between T-bond pricing and changes in equity risk, as measured by the implied volatility from equity-index options. Our 1992 to 2007 sample is attractive because of the modest inflation risk and sizable time-series variability in equity risk. Over 1997 to 2007 and for inclusive one-half and one-quarter subperiods, we find that the ...
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A framework is provided for pricing derivatives on defaultable bonds and other credit-risky contingent claims. The framework is in the spirit of reducedform models, but extends these models to include the case that default can occur only at specific times, such as coupon payment dates. While the framework does not provide an efficient setting for obtaining results about structural models, it is...
متن کاملA Variational Inequality from Pricing Convertible Bond
The model of pricing American-style convertible bond is formulated as a zero-sum Dynkin game, which can be transformed into a parabolic variational inequality PVI . The fundamental variable in this model is the stock price of the firm which issued the bond, and the differential operator in PVI is linear. The optimal call and conversion strategies correspond to the free boundaries of PVI. Some p...
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ژورنال
عنوان ژورنال: SSRN Electronic Journal
سال: 2012
ISSN: 1556-5068
DOI: 10.2139/ssrn.2078509