Valuing Convertible Bonds Based on LSRQM Method | Zendy

Jian Liu | Zendy; Lizhao Yan | Zendy; Chaoqun Ma | Zendy

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Valuing Convertible Bonds Based on LSRQM Method

Author(s) -

Jian Liu,

Lizhao Yan,

Chaoqun Ma

Publication year - 2014

Publication title -

discrete dynamics in nature and society

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 0.264

H-Index - 39

eISSN - 1607-887X

pISSN - 1026-0226

DOI - 10.1155/2014/301282

Subject(s) - convertible bond , bond , embedded option , convertible arbitrage , convertible , econometrics , financial economics , economics , business , actuarial science , finance , physics , capital asset pricing model , arbitrage pricing theory , risk arbitrage , thermodynamics

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

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