• 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