Pricing Convertible Bonds

Convertible bonds are a hybrid of bond and equity. Like a bond, they provide the holder with an income, although this is lower than on a conventional bond because the holder also has the right to buy the issuer s shares at a predetermined price during the life of the bond. These instruments now appeal to a much wider range of investors. There are few works on the subject of pricing convertible bonds. Most books discussing derivative products cover all details of pricing futures and options in minute detail. Convertible bonds and warrants are usually mentioned as an after thought in the latter chapters. This is the first book to address the very complex issue of pricing convertible bonds.