A Modified Tree Model for Pricing Convertible Bonds with Equity, Interest Rate, and Default Risk
Date Issued
2009
Date
2009
Author(s)
Zeng, You-Zhong
Abstract
Convertible bonds are some of the most popular financial products. They allow investors to exchange the company’s bonds for the company’s stocks within certain periods of time in the future. Some convertible bonds embed other options such as call option and put option. The tree method has advantages in pricing convertible bonds with embedded options over the Monte Carlo method. This thesis extends the tree method of Chambers and Lu (2007) and discusses the problem of the probability out of the valid range. It then provides a method to address this problem.
Subjects
convertible bonds
tree method
Type
thesis
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ntu-98-R96723064-1.pdf
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23.32 KB
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