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Questions tagged [convertible-bond]

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Convertible bonds pricer - implementation

Where I can find numerical implementation (in any programming language) of convertible bonds pricer based on the following article: E. Ayache, P. A. Forsyth, K. R. Vetzal, "The Valuation of ...
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How should we calculate the duration of a convertible bond?

For callable bonds we can use the effective duration to approximate the modified duration, since the future interest rates will affect the expected cash flows. For convertible bonds the underlying of ...
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AFV Model Implementation for Convertible Bonds

I am reading the original AFV model paper for pricing convertible bonds. https://cs.uwaterloo.ca/~paforsyt/convert.pdf The paper is very technical and I am having trouble finding the actual PDE's to ...
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1answer
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Implied credit spread convertible bonds with negative yield

I’m trying to understand what happens to the credit spread of a convertible bond when yields of the convertible are negative. I’ve heard there is an implied credit spread as spreads can’t really be ...
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1answer
69 views

Convertible Bond Pricer papers

I'm looking to build a convertible bond pricer. Where should I get started? Which papers/books should I look at?
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Reference on Pricing Model of Convertible Bonds based on MCMC Algorithm?

I have to implement convertible bonds pricing (in Stochastic Volatility condition)in Matlab or R using MCMC algorithm. Is there any paper or book which describes this method in detail?
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1answer
112 views

Convertible Bond in Foreign Currency - Quanto Adjustment

I need to value the following convertible bond: The bond notional and interest is denoted in USD, but is convertible into Euro denominated equity. Normally, I would value such a bond with a ...
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2answers
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What is the “maturity” of an “investment option”?

i am reading an article regarding convertible bonds and it keeps saying: ......firms facing investment options that are expected to mature shortly after issuance....... OR .......firms with ...
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2answers
205 views

Ito lemma of Convertible Bond under Two-factor Model Interest Rate

@Behrouz Maleki has provided the PDE of two factor model in other post so could anyone please provide Ito lemma of this equation and how this PDE was derived from Vasicek model. as far as I know it ...
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3answers
527 views

Pricing of convertible bonds

I'm trying to evaluate a convertible bond using the structural approach : the price of convertible bond is an option (call) on the firm value. We suppose that the firm value is equal to the sum of the ...
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2answers
1k views

How to calculate conversion parity for convertible bond?

Can someone explain how can I calculate the parity of this convertible bond? I know the formula is Current price of common stock x Conversion Ratio, but it doesn't seem to be right in this picture.
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279 views

Cheapness indicator for Convertibles Bonds

What indicator (or combination of those) could be used to roughly estimate the cheapness of a convertible bonds ? Like the price/earning ratio for equities. Thanks, Max.
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VIX For Convertible Bonds

Is there something similar to the VIX but related to the convertibles bonds market in the U.S. ? Thanks, Max.
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830 views

Why does the price of a convertible bond go up if the CDS spread goes up?

Looking at convertible bond prices in a commercial pricing tool, which is based on a model of Black-Scholes volatility plus a Poisson process of jump to default, I noticed that increasing the spread ...
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1answer
619 views

A question about pricing convertible bond with two different underlying assets

I have a question regarding the pricing of convertible bond. If I value the convertible bond with two different underlying assets, how can I incorporate two volatility and the correlation in the ...
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1answer
175 views

Discount rate, convertible debt and the effect of time

The way I understand it is that there are three main parameters to a convertible debt investment. An investment amount A discount rate A trigger event Now under most of the examples I have seen, a ...
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0answers
78 views

How can dividend protection be considered in the binomial model in pricing the convertible bond?

If the convertible bond has dividend-protection, how can we cater it in the binomial model? If there is dividend protection at or above 1%, can we impose input of dividend yield of 1% in the ...
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117 views

How is the redemption right on delisting of underlying shares held by holder in the convertible bond valued?

As title, If there is no delisting constraint, then I can treat the redemption right as the put right on the convertible bond. If there is redemption right on delisting, what is the conventional ...
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1answer
882 views

What is the difference between the methods (listed in content) in pricing convertible bond?

To price the convertible bond, one of the models is the bond plus equity option method. That is, the value of convertible bonds is evaluated by finding the value of the straight bond and the value of ...
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3answers
24k views

What is the difference between convertible bond and bond with warrant?

One site suggested the difference is that the warrant in the bond with warrant is a fixed price on company stock. E.g. for a \$1000 bond, you can buy 500 shares at \$2 each. And that convertible bonds ...
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1answer
2k views

How do I backtest a convertible bond arbitrage strategy in R/Matlab?

Since no one was able to answer my previous question, I am going to try to backtest a modern convertible bond arbitrage strategy myself (perhaps I'll report the results back here, if you're lucky :)). ...
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1answer
746 views

What research is available on the performance of convertible bond arbitrage models?

The basic principles of convertible bond arbitrage have been clear at least since Thorp and Kassouf (1967). For those who are not familiar, the arbitrage entails purchasing a convertible bond and ...
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16k views

How do I calculate the delta of a convertible bond?

How can I find the delta of a convertible bond to be used for hedging?
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1k views

Which risk-free rate to use to price a bond issued in one currency but convertible into equity in another?

A convertible bond denominated in USD is issued by an Indian company (with equity traded in INR). The bond will be repaid in USD and if converted into equity in the company, the conversion price will ...