Open Access
2014 Convertible Bonds with Higher Loan Rate: Model, Valuation, and Optimal Strategy
Haiyang Wang, Zhen Wu
Abstr. Appl. Anal. 2014(SI37): 1-9 (2014). DOI: 10.1155/2014/341519


We study the pricing problem for convertible bonds via backward stochastic differential equations (BSDEs). By virtue of reflected BSDEs and Malliavin derivatives, we establish the formulae for the fair price of convertible bonds and the hedging portfolio strategy explicitly. We also obtain the optimal conversion time when there is no dividends-paying for underlying common stocks. Furthermore, we consider the case that the loan rate is higher than riskless interest rate in a financial market, and conclude that it does not affect the price of convertible bonds actually. To illustrate our results, some numerical simulations are given and discussed at last.


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Haiyang Wang. Zhen Wu. "Convertible Bonds with Higher Loan Rate: Model, Valuation, and Optimal Strategy." Abstr. Appl. Anal. 2014 (SI37) 1 - 9, 2014.


Published: 2014
First available in Project Euclid: 6 October 2014

zbMATH: 07022188
MathSciNet: MR3200777
Digital Object Identifier: 10.1155/2014/341519

Rights: Copyright © 2014 Hindawi

Vol.2014 • No. SI37 • 2014
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