Pricing and optimal conversion strategy of convertible bonds

This paper develop a method based on the reflected Backward Stochastic Differential Equations (BSDEs for short) to solve the pricing and the optimal conversion strategy of noncallable American Style convertible bonds. We characterize the value functions of the noncallable convertible bonds in terms of the reflected backward stochastic differential equation, and provide the optimal conversion strategy for bondholders. Some numerical Simulation methods for the pricing and the optimal conversion strategy of noncallable American Style convertible bonds are given.