Xiao, Tim - In: International Journal of Financial Markets and Derivatives 4 (2015) 1, pp. 1-25
hypothesis. Instead, we find that convertibles have relatively large positive gammas. As a typical convertible arbitrage strategy … such, the model can back out the market prices of convertible bonds. A prevailing belief in the market is that convertible … arbitrage is mainly due to convertible underpricing. Empirically, however, we do not find evidence supporting the underpricing …