Price Convolution for Convertible Bonds in a Jump Diffusion Setting with Stochastic Interest Rates

2011 ◽  
Author(s):  
Laura Ballotta ◽  
Ioannis Kyriakou
Keyword(s):  
Interest Rates ◽  
Jump Diffusion ◽  
Convertible Bonds ◽  
Stochastic Interest Rates ◽  
Stochastic Interest

Pricing Option on Jump Diffusion and Stochastic Interest Rates Model

2011 ◽  
Vol 50-51 ◽  
pp. 723-727
Author(s):  
Bo Peng ◽  
Zhi Hui Wu
Keyword(s):  
Interest Rates ◽  
Stock Price ◽  
Special Kind ◽  
Jump Process ◽  
Jump Diffusion ◽  
Time Interval ◽  
Martingale Method ◽  
Stochastic Interest Rates ◽  
Stochastic Interest ◽  
Jump Diffusion Model

This paper assumed that the stock price jump process for a special kind of renewal jump process, that is incident time interval for independent and subordinate to Gamma distribution random variable sequence. We obtain the European bi-direction option pricing formulas on jump diffusion model under the stochastic interest rates by simply mathematical induce by means of martingale method.

Pricing of Some Exotic Options under Jump Diffusion and Stochastic Interest Rates Model

2011 ◽  
Vol 109 ◽  
pp. 405-409
Author(s):  
Bo Peng
Keyword(s):  
Interest Rates ◽  
Poisson Process ◽  
Stock Price ◽  
Jump Process ◽  
Jump Diffusion ◽  
Martingale Method ◽  
Exotic Options ◽  
Stochastic Interest Rates ◽  
Stochastic Interest ◽  
Risk Neutral

This paper assumes that jump process in underlying assets-stock price is more common than Poisson process and derive the pricing formulas of some exotic options under the stochastic interest rates by martingale method with the risk-neutral hypothesis.

scholarly journals Valuing Convertible Bonds Based on LSRQM Method

2014 ◽  
Vol 2014 ◽  
pp. 1-9 ◽  
Author(s):  
Jian Liu ◽  
Lizhao Yan ◽  
Chaoqun Ma
Keyword(s):  
Interest Rates ◽  
Financial Market ◽  
Convertible Bonds ◽  
Theoretical Research ◽  
Stochastic Interest Rates ◽  
Market Prices ◽  
Quasi Monte Carlo ◽  
Financial Products ◽  
Stochastic Interest ◽  
Pricing Theory

Convertible bonds are one of the essential financial products for corporate finance, while the pricing theory is the key problem to the theoretical research of convertible bonds. This paper demonstrates how to price convertible bonds with call and put provisions using Least-Squares Randomized Quasi-Monte Carlo (LSRQM) method. We consider the financial market with stochastic interest rates and credit risk and present a detailed description on calculating steps of convertible bonds value. The empirical results show that the model fits well the market prices of convertible bonds in China’s market and the LSRQM method is effective.

PRICING AND HEDGING CONVERTIBLE BONDS: DELAYED CALLS AND UNCERTAIN VOLATILITY

2006 ◽  
Vol 09 (03) ◽  
pp. 415-453 ◽  
Author(s):  
ALI BORA YIǦITBAŞIOǦLU ◽  
CAROL ALEXANDER
Keyword(s):  
Interest Rates ◽  
Important Determinant ◽  
Convertible Bonds ◽  
Reduced Form ◽  
Hazard Rates ◽  
Stochastic Interest Rates ◽  
Period Effects ◽  
Stochastic Interest ◽  
Non Linear ◽  
The Common

Arbitrage-free price bounds for convertible bonds are obtained assuming equity-linked hazard rates, stochastic interest rates and different assumptions about default and recovery behavior. Uncertainty in volatility is modeled using a stochastic volatility process for the common stock that lies within a band but makes few other assumptions about volatility dynamics. A non-linear multi-factor reduced-form equity-linked default model leads to a set of non-linear partial differential complementarity equations that are governed by the volatility path. Empirical results focus on call notice period effects. Increasingly pessimistic values for the issuer's substitution asset obtain as we introduce more uncertainty during the notice period. Uncertain in volatility, in particular, appears to be an important determinant of the call premium that is so often observed in issuer's call policies.

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