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WANG Yuan-pei. The Pricing Analysis of Irredeemable Convertible Bonds[J]. Journal of East China Normal University (Natural Sciences), 2003, (4): 25-32.
Citation:
WANG Yuan-pei. The Pricing Analysis of Irredeemable Convertible Bonds[J]. Journal of East China Normal University (Natural Sciences), 2003, (4): 25-32.
WANG Yuan-pei. The Pricing Analysis of Irredeemable Convertible Bonds[J]. Journal of East China Normal University (Natural Sciences), 2003, (4): 25-32.
Citation:
WANG Yuan-pei. The Pricing Analysis of Irredeemable Convertible Bonds[J]. Journal of East China Normal University (Natural Sciences), 2003, (4): 25-32.
In this paper, we prove that there exist two boundaries which are the optimal exercise boundary and the worst exercise boundary by changing the valuation of convertible bonds into the two-free-boundary promblem of the Black-Scholes equation.When the value of a company acrosses increasingly the optimal exercise boundary,the return of its irredeemable bonds is largest if they are converted into its stocks.When the vale of a company acrosses decreasingly the worst exercise boundary,the value of its irredeemable bonds is zero if they are converted into its stocks.
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