Convertible Bonds: Risks and Optimal Strategies

Within the structural approach for credit risk models we discuss the optimal exercise of the callable and convertible bonds. The Vasi˘cek–model is applied to incorporate interest rate risk into the firm’s value process which follows a geometric Brownian motion. Finally, we derive pricing bounds for convertible bonds in an uncertain volatility model, i.e. when the volatility of the firm value process lies between two extreme values.

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Year of publication:	2009-12-12
Authors:	Huang, Haishi
Institutions:	University of Bonn, Germany
Subject:	Convertible bond \| game option \| uncertain volatility \| interest rate risk

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Extent:	application/pdf
Series:	Bonn Econ Discussion Papers.
Type of publication:	Book / Working Paper
Language:	English
Notes:	2 pages long
Classification:	G12 - Asset Pricing ; G33 - Bankruptcy; Liquidation
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10008475713