DocumentCode
1807054
Title
Optimal stopping framework for valuing convertible bonds with intensity to model uncertain call notice
Author
Liu Jieqian ; Yang Chen ; Li Shenghong
Author_Institution
Center of Math. Sci., Zhejiang Univ., Hangzhou, China
Volume
4
fYear
2011
fDate
24-26 Dec. 2011
Firstpage
2606
Lastpage
2609
Abstract
Empirical research shows that the call provision embedded in the convertible bonds and American call options may be delayed for different reasons. While there are several researches focused on recall provision embedded in the callable American call options under intensity-based framework, few performed detailed research on that in convertible bonds. Therefore, the main purpose of the current work is to model and study the call provision embedded in the callable convertible bonds using intensity-based approach. We formulate this as an optimal stopping problem. Under certain assumptions, we can then get a nonlinear complementarity problem that can be solved by numerical procedures. We also consider credit risk. Since there are already lots of literatures on this, we only provide a theoretical formulation under the AFV model framework.
Keywords
financial management; numerical analysis; pricing; stock markets; AFV model framework; callable American call options; callable convertible bonds; intensity-based framework; nonlinear complementarity problem; numerical procedures; optimal stopping framework; stock price; uncertain call notice modelling; call provision; convertible bonds; intensity; nonlinear complementarity problem; optimal stopping problems;
fLanguage
English
Publisher
ieee
Conference_Titel
Computer Science and Network Technology (ICCSNT), 2011 International Conference on
Conference_Location
Harbin
Print_ISBN
978-1-4577-1586-0
Type
conf
DOI
10.1109/ICCSNT.2011.6182501
Filename
6182501
Link To Document