| Summary: | 碩士 === 銘傳大學 === 財務金融學系碩士班 === 95 === Convertible bonds have both features of bonds and stocks, as there is the stability income from bonds and the profit-making potential from stocks. There is also the function of tax savings, so the valuation of convertible bonds has neglected the importance of the credit risks. But after the Procomp incident broke out, companies take a more serious attitude in issuing convertible bonds, so the valuation of the convertible bonds have to consider the factors of the credit risks.
The main purpose of this research is to consider credit risks in the valuation model of convertible bonds to build a more accurate one. Based on the Brennan & Schwartz (1977) one-factor model and choosing of numerical method with King (1986) Implicit Finite Difference Method, we get the estimated value.In order to obtain the discount rate after considering the credit risks, we use the default rate obtained from the stock price in the Merton model.
This study finds that the estimate value without considering the credit risks is all overstatement. But in order to prove that our model considering credit risks are more accurate, we compared with Zeng (1999) and choose the same eight samples, with 5% level of significance, we conclude that the error between estimated price and market price in five out of eight samples are less than Zeng (1999).
|
|---|
