The Feasibility study of Issuing Mandatory Convertible Bonds in Taiwan
Date Issued
2007
Date
2007
Author(s)
Huang, Tin-Wei
DOI
zh-TW
Abstract
This paper examined that if the hedge performance of convertible bonds by using binomial tree is as good as hedge performance of mandatory convertible bonds by using contingent claims. The analysis uses daily and weekly convertible bonds market price in Taiwan economic journal from 2006 Jan. to 2007 Mar. The conclusions are below:
(1) The pricing model of mandatory convertible bonds is more accurately than the pricing model of convertible bonds.
(2) Using adjusted option pricing model by Black-Scholes to calculate hedge ratio against market prices, and compare the hedge performance with mandatory convertible bonds. We find out that the hedge performance of standard convertible bonds is acceptable.
(3) The hedge errors against binomial tree prices are small than hedge errors against market prices. The hedge performance of real market tends to be bigger and systematic.
Subjects
可轉換公司債
強制轉換公司債
避險誤差
convertible bond
mandatory convertible bond
bond
Type
thesis