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The Valuation of Convertible Bonds with Credit Risk
Elie Ayache / Kenneth R. Vetzal / Peter A. Forsyth
algorithms / asset pricingResource overview

The Valuation of Convertible Bonds with Credit Risk

Paper

by Elie Ayache, Kenneth R. Vetzal, Peter A. Forsyth

Tags
algorithmsasset pricingconvertible bondscredit riskfixed incomemathematical financenumerical methodsoption pricing

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Understand this paper

Suggested foundations for credit and counterparty risk and options and derivatives pricing. Specialist prerequisites vary by paper.

Before you read

  1. Credit Instruments, PD/LGD/EAD, and Rating Migration

    Separate default probability, loss severity and exposure.

  2. Conditional Expectation

    Read conditional default and exposure quantities.

  3. The Binomial Model

    Build replication and risk-neutral probabilities in a tractable model.

  4. Market Model and Risk-Neutral Valuation

    Distinguish pricing probabilities from physical forecasts.

Go further

  1. Threshold Models and the Gaussian Copula for Portfolio Default

    Study dependence between defaults.

  2. CVA and DVA

    Connect exposure and counterparty losses to valuation adjustments.

  3. The Black-Scholes PDE, Formula and Implied Volatility

    Connect the pricing equation, closed-form value and implied volatility.

Explore a related reading path

Lesson links open public previews. Access to full lessons depends on the topic and your membership.

Explore Counterparty Credit Risk and CVA Explore Derivatives Pricing and Computational Finance

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