ConvertibleBond-class

ConvertibleBond

Convertible bond with exercise into stock

Algorithms to price American and European
equity options, convertible bonds and a
variety of other financial derivatives. It uses an
extension of the usual Black-Scholes model in which
jump to default may occur at a probability specified
by a power-law link between stock price and hazard
rate as found in the paper by Takahashi, Kobayashi,
and Nakagawa (2001) <doi:10.3905/jfi.2001.319302>. We
use ideas and techniques from Andersen and
Buffum (2002) <doi:10.2139/ssrn.355308> and
Linetsky (2006) <doi:10.1111/j.1467-9965.2006.00271.x>.

Brian Boonstra

ragtop

Pricing Equity Derivatives with Extensions of Black-Scholes

ConvertibleBond-class function

<dl class="dl-horizontal">
<dt><code>conversion_ratio</code></dt><dd>The number of shares, per bond, that result from exercise</dd></dl><dt><code>dividend_ceiling</code></dt><dd>The level of dividend protection (if any) specified in terms and conditions</dd>

Fields

<dl class="dl-horizontal">
<dt><code>exercise_decision(v, S, t, discount_factor_fctn = discount_factor_fcn, ...)</code></dt><dd>Find indexes where hold value v will be inferior to conversion value at each stock price level in S, adjusted to include all past coupons</dd></dl><dt><code>optionality_fcn(v, S, t, discount_factor_fctn = discount_factor_fcn, ...)</code></dt><dd>Return the greater of hold value v or exercise value at each stock price level in S. If the given date is beyond maturity, return value at maturity.</dd><dt><code>terminal_values(v, ...)</code></dt><dd>Return a terminal value. defaults to simply calling optionality_fcn.</dd><dt><code>update_cashflows(
 small_t,
 big_t,
 discount_factor_fctn = discount_factor_fcn,
 include_notional = TRUE,
 ...
)</code></dt><dd>Update last_computed_cash and return cashflow information for the given time period, valued at big_t</dd>

ConvertibleBond-class: Convertible bond with exercise into stock

Description

Arguments

Fields

Methods