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Convertible Bond Option - Yield analyzis

The following problem can be understood as an extension/modification of the textbook example of Hull (Options, Futures and other derivatives, chapter 27.4, 9th Edition), which is related to ...
PAS's user avatar
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0 answers
55 views

m-of-n Soft Call Trigger

I'm trying to do some convertible bond pricing. Typically, there's a soft call provision which is triggered if the value of the underlying equity is above x% of par for m of the last n days. (Usually ...
Charles0349's user avatar
1 vote
0 answers
290 views

Total Return Swap (TRS) on Convertible Bond

Is there any relevant paper/source I can look at for pricing TRS on convertible bond? Specially, how should I evaluate the asset return leg? Let's say I already have an convertible bond pricer that ...
Fail Analysis's user avatar
2 votes
1 answer
238 views

Why does changing the step size in my Binomial Tree changes the final stock prices so much?

I am trying to price a convertible bond by using a binomial tree. For this, I wrote a binomial tree for the stock price. I noticed that changing the step size (timesteps), changes the final value of ...
Daan Commandeur's user avatar
3 votes
1 answer
523 views

Aggregating greeks to portfolio level

I have been asked to calculate/aggregate certain Greeks (delta, gamma, and vega) up to portfolio level for a portfolio consisting of a range of (long and short) equities, convertible bonds, and ...
MilesS's user avatar
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3 votes
0 answers
188 views

Calculate Gamma and Vega of a portfolio of convertible bonds [closed]

I am being asked to calculate the gamma and vega of an existing portfolio of convertible bonds. does anyone has a documentation of direction that i could use to get going pls? This is a premiere for ...
Rene Chan's user avatar
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1 vote
0 answers
342 views

Convertible Bond Price change estimation using Delta/Gamma

The holder of a convertible bond is effectively long an American call option on the underlying shares. given the delta and gamma, and underlying stock price change, what is the best way to estimate ...
user51725's user avatar
1 vote
0 answers
198 views

Gamma PNL for Convertible Bond

so just trying to compute gamma PNL for some CB positions using Bloomberg data for delta/gamma. for a CB, BBG has delta 0.74 and Gamma 0.00524. if I want to compute the delta PNL and Gamma PNL for a ...
user51725's user avatar
2 votes
2 answers
466 views

Is there any source that describes Wall Street quotation conventions for fixed income securities (e.g. corporate bonds)?

For instance, high yield corporate bonds tend to be quoted by price and investment grade tends to be quoted by yield. Is there any source that describes such quoting conventions, or corporate bonds ...
Slow Learner's user avatar
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1 answer
2k views

Struggling with Modeling Convertible Bond using Python

I am trying to price Convertible bond with the following data: price = 5.11 coupon = 0.0575 frequency = semi-annual risk free rate = 0.02347 conversion Ratio = 3.8095 Conversion Price = 26.25 ...
Desi_Quant's user avatar
0 votes
1 answer
613 views

QuantLib convertible bond pricing generates strange delta

I am trying to generate equity delta for convertible bond using QuantLib(version 1.14) functions, but the deltas generated either using a repricing approach or by directly obtaining from the tree(code ...
Michael's user avatar
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What are some robust Contingent Capital Instrument available?

I recently was made aware of the existence of Contingent Capital Instruments like CoCo Bonds. I was wondering if there are other robust options available for Big Banks in this domain?
noisyoscillator's user avatar
1 vote
1 answer
127 views

Newly issued convertible bond conversion price typically higher or lower than current stock price?

Reading this news about the valuation of airbnb makes me wonder. https://www.reuters.com/article/us-airbnb-debt/airbnbs-new-1-billion-investment-comes-at-lower-valuation-sources-idUSKBN21P3IM ...
CuriousMind's user avatar
3 votes
1 answer
372 views

Quantlib - exercise probability function?

I am using Quantlib to obtain the option value embedded in a convertible bond. I create an american option as follows: ...
Leon's user avatar
  • 31
0 votes
1 answer
40 views

Finding new convert issuances [closed]

What is the best way to find new convert bond issuances? I have access to a Bloomberg terminal and google, and between the two I feel I ought to be able to find new issuances, but I can't. Every time ...
user43238's user avatar
2 votes
1 answer
378 views

Why do we have to use in-the-money paths in LSMC, and how?

In Longstaff's original LSMC paper (Valuing American Options by Simulation: A Simple Least-Squares Approach, 2001 (link)), it is claimed that one should only use in-the-money paths for regression at ...
Vim's user avatar
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2 votes
0 answers
84 views

synthetic convertible dynamics

A synthetic convertible bond can be created by combining a non-convertible bond with a long dated call option or warrant of the same issuer. Are there any papers which studies the dynamics of ...
pyCthon's user avatar
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4 votes
2 answers
630 views

Is it possible to model path-dependent clauses using finite difference methods?

I'm trying to build a convertible bond pricer. In my case a convertible bond is a complex derivative with call, put and conversion price reset clauses, and all of the clauses are triggered in a path-...
Vim's user avatar
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1 vote
0 answers
330 views

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 ...
B_B's user avatar
  • 83
0 votes
2 answers
1k views

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 ...
Xavi Hernandez's user avatar
1 vote
0 answers
240 views

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 ...
John Doe's user avatar
  • 387
2 votes
1 answer
280 views

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 ...
Simon Nicholls's user avatar
2 votes
1 answer
262 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?
John Doe's user avatar
  • 387
1 vote
1 answer
803 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 ...
MartinF's user avatar
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-2 votes
2 answers
164 views

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 ...
user29843's user avatar
4 votes
2 answers
680 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 ...
Fad F's user avatar
  • 61
0 votes
3 answers
933 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 ...
Carl Zeiss's user avatar
4 votes
2 answers
2k 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.
Dzsonibigud's user avatar
1 vote
2 answers
594 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.
Maxime's user avatar
  • 319
0 votes
0 answers
81 views

VIX For Convertible Bonds

Is there something similar to the VIX but related to the convertibles bonds market in the U.S. ? Thanks, Max.
Maxime's user avatar
  • 319
0 votes
2 answers
1k 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 ...
jwg's user avatar
  • 224
4 votes
1 answer
707 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 ...
Dennis's user avatar
  • 501
1 vote
1 answer
254 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 ...
Maxim Gershkovich's user avatar
2 votes
0 answers
117 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 ...
Dennis's user avatar
  • 501
3 votes
0 answers
144 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 ...
Dennis's user avatar
  • 501
2 votes
1 answer
1k 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 ...
Dennis's user avatar
  • 501
6 votes
4 answers
37k 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 ...
Michael Johansen's user avatar
7 votes
1 answer
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 :)). ...
Tal Fishman's user avatar
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6 votes
1 answer
939 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 ...
Tal Fishman's user avatar
  • 13.5k
11 votes
4 answers
23k 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?
tshauck's user avatar
  • 765
9 votes
2 answers
2k 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 ...
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