Game option models of convertible bonds: Determinants of call policies
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چکیده
منابع مشابه
Game option models of convertible bonds: Determinants of call policies
The interaction of bondholder's conversion and issuer's call in a convertible bond leads to a game option model between the two counterparties. Like typical pricing models for corporate debts, the fair value of a convertible bond is highly dependent on issuer's credit risk, tax benefits of coupons and other structural features. The convertible bond pricing models in the literature can be catego...
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In practice, convertible bonds can often be called only if notice is given to the holders. Most methods for valuing convertible bonds assume that the bond is continuously callable. In this paper, we develop an accurate PDE method for valuing convertible bonds with a finite notice period. Example computations are presented which illustrate the effect of varying notice periods. The results are co...
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This paper shows that the probability of exercise of convertible bonds issued against a firm’s stock directly affects the liquidity of the stock itself. Using the ratio of absolute stock return to its dollar volume as a proxy for stock liquidity I demonstrate that there is a direct and positive relationship between conversion probability and stock liquidity while controlling for firm size, book...
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A convertible (callable) bond is a security that the holder can convert into a specified number of underlying shares. In addition, the issuer can recall the bond, paying some compensation, or force the holder to convert it immediately. We give an explicit solution to the corresponding optimal stopping game in the context of a reduced form model driven by a Brownian motion and a compound Poisson...
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A firm issues a convertible bond. At each subsequent time, the bondholder must decide whether to continue to hold the bond, thereby collecting coupons, or to convert it to stock. The bondholder wishes to choose a conversion strategy to maximize the bond value. Subject to some restrictions, the bond can be called by the issuing firm, which presumably acts to maximize the equity value of the firm...
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ژورنال
عنوان ژورنال: Journal of Financial Engineering
سال: 2014
ISSN: 2345-7686,2382-5596
DOI: 10.1142/s2345768614500299