Convertible bonds with higher loan rate: model, valuation, and optimal strategy
type: Item
instance of: scholarly article
title: Convertible bonds with higher loan rate: model, valuation, and optimal strategy
zbMATH Open document ID: 1406.91456
DOI: 10.1155/2014/341519
author: Haiyang Wang
author: Zhen Wu
published in: Abstract and Applied Analysis
publication date: 2019-02-14T00:00:00Z
review text: Summary: We study the pricing problem for convertible bonds via backward stochastic differential equations (BSDEs). By virtue of reflected BSDEs and Malliavin derivatives, we establish the formulae for the fair price of convertible bonds and the hedging portfolio strategy explicitly. We also obtain the optimal conversion time when there is no dividends-paying for underlying common stocks. Furthermore, we consider the case that the loan rate is higher than riskless interest rate in a financial market, and conclude that it does not affect the price of convertible bonds actually. To illustrate our results, some numerical simulations are given and discussed at last.
Mathematics Subject Classification ID: 91G20
Mathematics Subject Classification ID: 91G10
Mathematics Subject Classification ID: 60H10
Mathematics Subject Classification ID: 60H07
zbMATH DE Number: 7022188
zbMATH Keywords: convertible bond pricing
zbMATH Keywords: backward stochastic differential equations
zbMATH Keywords: hedging portfolio strategy
Wikidata QID: Q59036258
MaRDI profile type: Publication
full work available at URL: https://doi.org/10.1155/2014/341519
OpenAlex ID: W2053975290
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description: scientific article; zbMATH DE number 7022188