Convertible bond pricing models
Convertible bonds are an important segment of the corporate bond market, with worldwide out standings approaching US$235 billion.Simple pricing models value a convertible bond as being equivalent to a straight bond with an embedded option that enables the bond holder to convert to a specific amount...
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| Format: | Article |
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John Wiley & Sons
2013
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| _version_ | 1825803751302103040 |
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| author | Batten, Jonathan A. Khaw, Lee-Hwei Young, Martin R. |
| author_facet | Batten, Jonathan A. Khaw, Lee-Hwei Young, Martin R. |
| author_sort | Batten, Jonathan A. |
| collection | UUM |
| description | Convertible bonds are an important segment of the corporate bond market, with worldwide out standings approaching US$235 billion.Simple pricing models value a convertible bond as being equivalent to a straight bond with an embedded option that enables the bond holder to convert to a specific amount of common stock.The straight bond is subject to both interest rate and credit risk, whereas the option to convert is dependent on the underlying stock price, which exposes the convertible bond holder to equity risk.The complexity of these features means that convertible bonds tend to be treated casually in major derivatives and corporate finance textbooks. This paper presents a survey of the theoretical and empirical aspects of convertible bond pricing. The limitations of these studies are highlighted to identify those areas of research that may improve the valuation process and facilitate the application of these securities for corporate financing. |
| first_indexed | 2024-07-04T06:02:55Z |
| format | Article |
| id | uum-16688 |
| institution | Universiti Utara Malaysia |
| last_indexed | 2024-07-04T06:02:55Z |
| publishDate | 2013 |
| publisher | John Wiley & Sons |
| record_format | eprints |
| spelling | uum-166882016-04-18T02:44:45Z https://repo.uum.edu.my/id/eprint/16688/ Convertible bond pricing models Batten, Jonathan A. Khaw, Lee-Hwei Young, Martin R. HG Finance Convertible bonds are an important segment of the corporate bond market, with worldwide out standings approaching US$235 billion.Simple pricing models value a convertible bond as being equivalent to a straight bond with an embedded option that enables the bond holder to convert to a specific amount of common stock.The straight bond is subject to both interest rate and credit risk, whereas the option to convert is dependent on the underlying stock price, which exposes the convertible bond holder to equity risk.The complexity of these features means that convertible bonds tend to be treated casually in major derivatives and corporate finance textbooks. This paper presents a survey of the theoretical and empirical aspects of convertible bond pricing. The limitations of these studies are highlighted to identify those areas of research that may improve the valuation process and facilitate the application of these securities for corporate financing. John Wiley & Sons 2013 Article PeerReviewed Batten, Jonathan A. and Khaw, Lee-Hwei and Young, Martin R. (2013) Convertible bond pricing models. Journal of Economic Surveys, 28 (5). pp. 775-803. ISSN 0950-0804 http://doi.org/10.1111/joes.12016 doi:10.1111/joes.12016 doi:10.1111/joes.12016 |
| spellingShingle | HG Finance Batten, Jonathan A. Khaw, Lee-Hwei Young, Martin R. Convertible bond pricing models |
| title | Convertible bond pricing models |
| title_full | Convertible bond pricing models |
| title_fullStr | Convertible bond pricing models |
| title_full_unstemmed | Convertible bond pricing models |
| title_short | Convertible bond pricing models |
| title_sort | convertible bond pricing models |
| topic | HG Finance |
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