Pricing and Hedging Mandatory Convertible Bonds
Journal
Journal of Derivatives
ISSN
1074-1240
Type
journal article
Date Issued
2006-03-01
Author(s)
Abstract
This article examines the pricing and hedging of mandatory convertible bonds on the US market using daily market prices for a period of 498 trading days resulting in a sample of over 14,600 daily price observations. We explore the pricing and hedging performance based on a simple contingent claims model. On average, the pricing errors are lower than those found for standard convertible bonds. An analysis of the hedging performance of the model indicates that the model is useful for hedging as, on average, the hedging errors observed are relatively small and mostly unsystematic.
[http://www.manuel-ammann.com/pdf/WPS16_MCB_Paper_Jan2006.pdf]
[http://www.manuel-ammann.com/pdf/WPS16_MCB_Paper_Jan2006.pdf]
Language
English
Keywords
mandatory convertibles
hybrid securities
convertible bonds
HSG Classification
contribution to scientific community
Refereed
Yes
Publisher
Institutional Investor
Publisher place
New York
Volume
13
Number
3
Start page
30
End page
46
Pages
17
Subject(s)
Eprints ID
22499
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Name
Pricing_and_Hedging_MandatoryWPS16_MCB_Paper_Jan2006.pdf
Size
612.32 KB
Format
Adobe PDF
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