Arbitrage of Convertible Bonds

• Main Authors: Chien-lin Kuo, 郭建麟
• Other Authors: none
• Format: Others
• Language: zh-TW
• Published: 2003
• Online Access: http://ndltd.ncl.edu.tw/handle/02280607667580047473

碩士 === 國立雲林科技大學 === 企業管理系碩士班 === 91 === The convertible bond was not widely acknowledged by the people in the 18th century, alone with its complicated valuation which has caused most of the investors overlooked its advantages. Since the issuer of the convertible bond has increased rapidly in 1980, it started to draw both private and public investor's attention, and because of this reason, the convertible bond issuing company became the focus of the investment population gradually. However, investors didn't have good evaluation for such a high complexity derivative bonds. In fact, there are a numerous elements that could affect the convertible bonds, including stock price, exercise price, the fluctuation of the stock, risk rate, deadline, dividend and etc. Due to the large amount of influences, it causes difficulties for the investors to judge its essence value. Therefore, to approach to the true theoretical value, it is necessary to establish an evaluation model that it is based on accuracy with theoretical references. According to the deadline limitation of the convertible bonds, the convertible bonds itself can be divided into "European Option" and "American Option". When refer this analysis to the Put-Call Parity, a model which calculates the theoretical value of the convertible bond can be practiced out, and to operate in coordination of the "European Option" and "American Option" simultaneously for measurement in order to find out the complete theoretical value of the convertible bond. Maybe through this mathematics evaluation model, we are able to reveal the theoretical value of the convertible bond, and help the investors to make a more accurate and efficient investment decision.