Pricing Convertible Bonds with Default Risk: A Duffie-Singleton Approach
AbstractWe propose a new method to value convertible bonds(CBs). In particular, we explicitly take default risk into consideration based on Duffie-Singleton(1999), and provide a consistent and practical method for relative pricing of securities issued by a firm such as CBs, non-convertible corporate bonds and equities. Moreover, we show numerical examples using Japanese CBs' data, and compare our model with other practical models.
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Bibliographic InfoPaper provided by CIRJE, Faculty of Economics, University of Tokyo in its series CIRJE F-Series with number CIRJE-F-140.
Length: 34 pages
Date of creation: Nov 2001
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- Ali Bora Yigitsbasioglu & Dmitri Lvov & Naoufel El-Bachir, 2004. "Pricing Convertible Bonds by Simulation," ICMA Centre Discussion Papers in Finance icma-dp2004-14, Henley Business School, Reading University, revised Aug 2004.
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