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A structured PDE framework for pricing resettable convertible bonds

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  • Hyuncheul Lim

Abstract

We present a unified PDE framework for pricing resettable convertible bonds within the blended-discounting paradigm. The convertible-bond value is decomposed into a risky bond and a separately identified conversion-option component, which admits a closed-form solution in the conversion-only case. Reset clauses are modeled as a matrix-valued degenerate parabolic system, solved through a stable and convergent finite difference scheme. The resulting formulation preserves analytical clarity and computational efficiency.

Suggested Citation

  • Hyuncheul Lim, 2026. "A structured PDE framework for pricing resettable convertible bonds," Quantitative Finance, Taylor & Francis Journals, vol. 26(3), pages 419-432, March.
    • Handle: RePEc:taf:quantf:v:26:y:2026:i:3:p:419-432
    DOI: 10.1080/14697688.2026.2616345
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