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How do I calculate the delta of a convertible bond?

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How can I find the delta of a convertible bond to be used for hedging?

2 Answers

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Well, it takes a little more information than you've provided, but here are links to a pdf and associated excel spreadsheet that should help you answer your question.

up vote 3 down vote

Tangurena's answer and links give the right idea. You can get a rough approximation by finding the conversion price $K$ and using that $K$ as the strike in a standard Black-Scholes option pricer.

In practice, most people work with 3rd party models such as the ones built into Bloomberg, Monis, or Kynex.


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How do I calculate the delta of a convertible bond?

up vote 14 down vote

How can I find the delta of a convertible bond to be used for hedging?


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up vote 9 down vote

Well, it takes a little more information than you've provided, but here are links to a pdf and associated excel spreadsheet that should help you answer your question.

edit

There is no simple formula, as you may gather from the pdf Tangurena gave you. - quant_dev Apr 26 '11 at 18:03

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