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Binary Tree Pricing to Convertible Bonds with Credit Risk under Stochastic Interest Rates
Joint Authors
Rao, Yulei
Liu, Jian
Huang, Jian-bai
Source
Issue
Vol. 2013, Issue 2013 (31 Dec. 2013), pp.1-8, 8 p.
Publisher
Hindawi Publishing Corporation
Publication Date
2013-04-17
Country of Publication
Egypt
No. of Pages
8
Main Subjects
Abstract EN
The convertible bonds usually have multiple additional provisions that make their pricing problem more difficult than straight bonds and options.
This paper uses the binary tree method to model the finance market.
As the underlying stock prices and the interest rates are important to the convertible bonds, we describe their dynamic processes by different binary tree.
Moreover, we consider the influence of the credit risks on the convertible bonds that is described by the default rate and the recovery rate; then the two-factor binary tree model involving the credit risk is established.
On the basis of the theoretical analysis, we make numerical simulation and get the pricing results when the stock prices are CRR model and the interest rates follow the constant volatility and the time-varying volatility, respectively.
This model can be extended to other financial derivative instruments.
American Psychological Association (APA)
Huang, Jian-bai& Liu, Jian& Rao, Yulei. 2013. Binary Tree Pricing to Convertible Bonds with Credit Risk under Stochastic Interest Rates. Abstract and Applied Analysis،Vol. 2013, no. 2013, pp.1-8.
https://search.emarefa.net/detail/BIM-459102
Modern Language Association (MLA)
Huang, Jian-bai…[et al.]. Binary Tree Pricing to Convertible Bonds with Credit Risk under Stochastic Interest Rates. Abstract and Applied Analysis No. 2013 (2013), pp.1-8.
https://search.emarefa.net/detail/BIM-459102
American Medical Association (AMA)
Huang, Jian-bai& Liu, Jian& Rao, Yulei. Binary Tree Pricing to Convertible Bonds with Credit Risk under Stochastic Interest Rates. Abstract and Applied Analysis. 2013. Vol. 2013, no. 2013, pp.1-8.
https://search.emarefa.net/detail/BIM-459102
Data Type
Journal Articles
Language
English
Notes
Includes bibliographical references
Record ID
BIM-459102