Title :
Pricing Convertible Bonds with Reset Clauses and Stochastic Interest Rates
Author :
Yang, Jingyang ; Li, Shenghong
Author_Institution :
Dept. of Math., Zhejiang Univ., Hangzhou, China
Abstract :
By the martingale theory and transformation of probability measures, this paper obtains the analytical solution of the price of the convertible bond whose conversion price may reset at a predetermined time. The interest rate here follows an extended Vasicek model. In the numerical result, we find that the Monte Carlo method is efficient. Numerical result also shows that the correlated coefficient of the stock price and the interest rate is almost unacted on the price of the convertible bond.
Keywords :
Monte Carlo methods; economic indicators; pricing; stochastic processes; stock markets; Monte Carlo method; conversion price; convertible bond; convertible bonds pricing; extended Vasicek model; martingale theory; probability measures; stochastic interest rates; stock price; Asset management; Discrete wavelet transforms; Economic indicators; Integral equations; Mathematics; Measurement standards; Pricing; Q measurement; Stochastic processes; Time measurement; Convertible bond; Extended Vasicek model; Martingale theory; Reset clause;
Conference_Titel :
Business Intelligence and Financial Engineering, 2009. BIFE '09. International Conference on
Conference_Location :
Beijing
Print_ISBN :
978-0-7695-3705-4
DOI :
10.1109/BIFE.2009.85
