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Critical Analysis of the Binomial-Tree approach to Convertible Bonds in the framework of Tsiveriotis-Fernandes model

Author

Listed:
  • K. Milanov
  • O. Kounchev

Abstract

In the present paper we show that the Binomial-tree approach for pricing, hedging, and risk assessment of Convertible bonds in the framework of the Tsiveriotis-Fernandes model has serious drawbacks. Key words: Convertible bonds, Binomial tree, Tsiveriotis-Fernandes model, Convertible bond pricing, Convertible bond Greeks, Convertible Arbitrage, Delta-hedging of Convertible bonds, Risk Assessment of Convertible bonds.

Suggested Citation

  • K. Milanov & O. Kounchev, 2011. "Critical Analysis of the Binomial-Tree approach to Convertible Bonds in the framework of Tsiveriotis-Fernandes model," Papers 1111.2683, arXiv.org.
    • Handle: RePEc:arx:papers:1111.2683
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    File URL: http://arxiv.org/pdf/1111.2683
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