This study examines asset price dynamics (i.e. the convergence speed) in the event of pre-announced conversion values and dates. The theoretical framework for these dynamics has been developed in De Grauwe et al. (1999). Two instances of conversion are examined, notably the 1879-Resumption of...

Using a cost minimizing approach it can be shown that futures margins are set optimally when the cost rate induced by the margin equals the probability of default. Empirically this implies that extreme value analysis should be used since cost rates are, most likely, very small. Application of...