Convertible Bonds with Higher Loan Rate: Model, Valuation, and Optimal Strategy
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 optim...
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| Format: | Article |
| Language: | English |
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Wiley
2014-01-01
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| Series: | Abstract and Applied Analysis |
| Online Access: | http://dx.doi.org/10.1155/2014/341519 |
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| _version_ | 1832552468483932160 |
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| author | Haiyang Wang Zhen Wu |
| author_facet | Haiyang Wang Zhen Wu |
| author_sort | Haiyang Wang |
| collection | DOAJ |
| description | 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. |
| format | Article |
| id | doaj-art-f12966ef223341d4b55c12a608b03bde |
| institution | Kabale University |
| issn | 1085-3375 1687-0409 |
| language | English |
| publishDate | 2014-01-01 |
| publisher | Wiley |
| record_format | Article |
| series | Abstract and Applied Analysis |
| spelling | doaj-art-f12966ef223341d4b55c12a608b03bde2025-02-03T05:58:37ZengWileyAbstract and Applied Analysis1085-33751687-04092014-01-01201410.1155/2014/341519341519Convertible Bonds with Higher Loan Rate: Model, Valuation, and Optimal StrategyHaiyang Wang0Zhen Wu1School of Mathematics, Shandong University, No. 27 Shanda Nan Road, Jinan, Shandong 250100, ChinaSchool of Mathematics, Shandong University, No. 27 Shanda Nan Road, Jinan, Shandong 250100, ChinaWe 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.http://dx.doi.org/10.1155/2014/341519 |
| spellingShingle | Haiyang Wang Zhen Wu Convertible Bonds with Higher Loan Rate: Model, Valuation, and Optimal Strategy Abstract and Applied Analysis |
| title | Convertible Bonds with Higher Loan Rate: Model, Valuation, and Optimal Strategy |
| title_full | Convertible Bonds with Higher Loan Rate: Model, Valuation, and Optimal Strategy |
| title_fullStr | Convertible Bonds with Higher Loan Rate: Model, Valuation, and Optimal Strategy |
| title_full_unstemmed | Convertible Bonds with Higher Loan Rate: Model, Valuation, and Optimal Strategy |
| title_short | Convertible Bonds with Higher Loan Rate: Model, Valuation, and Optimal Strategy |
| title_sort | convertible bonds with higher loan rate model valuation and optimal strategy |
| url | http://dx.doi.org/10.1155/2014/341519 |
| work_keys_str_mv | AT haiyangwang convertiblebondswithhigherloanratemodelvaluationandoptimalstrategy AT zhenwu convertiblebondswithhigherloanratemodelvaluationandoptimalstrategy |