Timeline for Ito lemma of Convertible Bond under Two-factor Model Interest Rate
Current License: CC BY-SA 3.0
11 events
| when toggle format | what | by | license | comment | |
|---|---|---|---|---|---|
| Nov 14, 2016 at 15:22 | comment | added | Fad F | Dear Maleki .. I need to find duration and convexity and as you know i have to differentiate V twice.. but wondering what is V? i know that convertible bond= bond+option+premium | |
| Nov 14, 2016 at 15:14 | comment | added | user16651 | Yes , there is it , just we can use the numerical solution when we have PDE | |
| Nov 14, 2016 at 15:11 | comment | added | Fad F | I got it ..Many thanks ... still wondering if there is an exact solution for V? | |
| Nov 14, 2016 at 14:58 | comment | added | user16651 | Also , $$\frac{\partial P}{\partial t}+\mu(t,r_t)\frac{\partial P}{\partial r}+\frac{1}{2}\sigma^2(t,r_t)\frac{\partial^2 P}{\partial r^2}-r_tP=0 $$ then $$\frac{\partial P}{\partial t}+\frac{1}{2}\sigma^2(t,r_t)\frac{\partial^2 P}{\partial r^2}=r_tP-\mu(t,r_t)\frac{\partial P}{\partial r}$$ Note $$\mu(t,r_t)=\kappa(\theta-r_t)$$ | |
| Nov 14, 2016 at 14:56 | comment | added | user16651 | We sell one option and buy $\Delta _1$ unit Stock and $\Delta_2$ unit Zero-coupon bond | |
| Nov 14, 2016 at 13:54 | comment | added | Fad F | using this PDE, can we get the exact or closed solution of convertible bond with Vasicek? | |
| Nov 14, 2016 at 13:33 | comment | added | Fad F | can I have a reference for that please? | |
| Nov 14, 2016 at 13:33 | comment | added | Fad F | You are really incredible guys .. Many thanks | |
| Nov 11, 2016 at 16:26 | history | edited | user16651 | CC BY-SA 3.0 |
added 4 characters in body
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| Nov 11, 2016 at 16:25 | comment | added | Gordon | A good alternative addition. | |
| Nov 11, 2016 at 16:23 | history | answered | user16651 | CC BY-SA 3.0 |