A CONVERTIBLE-BOND-PRICING METHOD BASED ON BOND PRICES ON MARKETS

1 online resource (101 pages) : PDF

2011

University of North Carolina at Charlotte

ABSTRACTQIANG SHI. A convertible-bond-pricing method based on bond prices on markets.(Under the direction of DR. YOU-LAN ZHU)This thesis is devoted to evaluating two-factor convertible bonds. Different zero-coupon bond curves are inputted when evaluating convertible bonds issued by com-panies with different credit ratings. Thus the effect of the company's credit on the price of the convertible bond is easily and accurately included during the computation. In the model for the interest rate, the parameters in the variance are determinedfrom the market data by statistics and the market price of risk is determined by a zero-coupon bond curve through solving an inverse problem. When we price the convertible bond, a free-boundary problem is solved. A Singularity-Separating Method(SSM) is proposed in order to solve this problem e±ciently. Taking the market data as input, we can easily, quickly, and reasonably obtain the price of a convertible bond.

doctoral dissertations

Mathematics

Ph.D.

Convertible Bond
Credit Rating
Free Boundary
Linear Complementarity
Market Price of Risk
Singularity Seperat

Applied Mathematics

Zhu, You-lan

Avrin, Joel
Buttimer, Richard
Oh, Hae-Soo
Plath, Tony

Thesis (Ph.D.)--University of North Carolina at Charlotte, 2011.

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Shi_uncc_0694D_10166

http://hdl.handle.net/20.500.13093/etd:1386