Pricing Convertible Bonds with Default Risk
- 31 December 2001
- journal article
- Published by With Intelligence LLC in The Journal of Fixed Income
- Vol. 11 (3) , 20-29
- https://doi.org/10.3905/jfi.2001.319302
Abstract
This article proposes a new method to value convertible bonds. It characterizes default risk exogenously, and provides a consistent and practical reduced-form approach for relative pricing of securities including convertible and non-convertible corporate bonds and equities. The authors demonstrate the method with numerical examples using Japanese convertible bond data, and compare the model to other practical models.Keywords
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