Pricing Convertible Bonds: Ultimate Convertible Bond Pricing Model
The Ultimate Convertible Bond Pricing Model is an off-the-shelf solution that employs a partial differential equation (PDE) methodology for valuing a full range of convertible bonds. The Ultimate Convertible Bond Pricing Model accurately captures dividends and provides much smoother and faster convergence than tree-based approaches. The model provides comprehensive support for CBs with the standard range of features including:
- Fixed, proportional, or mixed fixed/proportional dividend models. Explicit dividend schedules or internally built.
- Hazard rates calibrated from CDS spreads (or exogenous user input).
- Fixed, floating or mixed fixed/floating coupon models. Explicit coupon date schedules or internally built.
- Separate treasury and benchmark curves.
- Convertibles written on foreign stocks.
- Hard call and discrete put schedules.
- M of N soft calls with arbitrary number of days for the soft call trigger and soft call window including time variable call price/protection price schedules.
- Contingent conversion (COCOs), conversion ratio resets, with pertinent parameters time variable according to user defined schedules.
- Many types of make whole provisions including make whole conversion ratio adjustment matrices and change of control provisions.
- Funding spread, borrow rate, choice of day count basis and holiday calendar support, switches for inclusion of accrued interest upon call, conversion, put, or default.
- Outputs include theoretical price, all standard Greeks, interest, hazard, credit spread curve sensitivities, and many market implied quantities.
Like all SciComp Consulting solutions the Ultimate Convertible Bond Pricing Model can be enhanced/modified to meet any particular modeling needs you may have and is available as C/C++ source code, Windows/Linux executable, or a ready-to-use Excel spreadsheet and add-in.
- Clean, dirty prices, accrued interest
- Parity, premium
- Straight bond price
Sensitivities (computation controlled by switches):
- Delta, gamma, theta
- Change in implied vol (vega, volga, vanna)
- Parallel shift of yield curve
- Change in borrow rate
- Change in hazard rate
Implieds (computation controlled by switches):
- Implied vol given hazard rate and market price
- Implied hazard rate given vol and market price
- Provides a complete, ready-to-use pricing and risk solution for convertible bonds.
- Delivers a fast entry into the convertible bond market.
- Benefits from a standard Microsoft Excel interface for ease-of-use.
- Other interfaces (Java, COM, .Net) and source code available for additional
Need more information on the Ultimate Convertible Bond Pricing Model? Contact us
SciFinance - Complete solution for pricing convertible bonds
Need a robust in-house pricing development solution for convertible bonds? SciFinance automates coding and delivers source code (C/C++/CUDA) for custom convertible bond pricing and risk models. Read more