An Empirical Study of Chambers and Lu’s Convertible Bond Pricing Model

• Main Authors: Kun_Ching Lin, 林昆慶
• Other Authors: 呂育道
• Format: Others
• Language: zh-TW
• Published: 2009
• Online Access: http://ndltd.ncl.edu.tw/handle/18246602375725383761

碩士 === 國立臺灣大學 === 財務金融學研究所 === 97 === Convertible bonds are bonds issued by a company where the holders have the option to exchange the bonds for the company’s stock by certain conversion ratio. It is like a bond plus an option. However, we cannot simply value convertible bonds by vanilla option formulas because convertible bonds are almost always callable. Chambers and Lu proposed a method pricing convertible bonds using binomial tree model in 2007. Their model was a two-factor model where the stock price and the interest rate were the two factors. In addition, they added default risk and included risky interest rates in their model. The purpose of my thesis is to compare the results of their model with the empirical data of Taiwan’s convertible bonds market and other model.