Valuation of Convertible Bonds with Jump Risk

• Main Authors: Wei-Sheng Chien, 簡偉勝
• Other Authors: 姜一銘
• Format: Others
• Language: en_US
• Published: 2011
• Online Access: http://ndltd.ncl.edu.tw/handle/54792780465048625283

碩士 === 元智大學 === 財務金融學程 === 99 === The model in this paper is based on Liao and Huang (2006), which not only contains tax benefits and bankrupt costs, but also takes refunding costs and a call notice period of the redemption into consideration. Merion Jump-diffusion process is chosen as the measurement of firm’s value process to recalculate the value of convertible bond and to discover the optimal strategy. The results demonstrate that the asset value is overestimated without considering jump risk. Thus, the optimal call strategy of convertible bond with jump risk will be higher than without jump risk and the optimal conversion strategy will be ahead of time.