Estimate the True Maturity of Convertible Bonds under the Optimal Conversion Strategy

• Main Authors: Ting-Fu Chen, 陳亭甫
• Other Authors: Mei-Hsiu Chi
• Format: Others
• Language: zh-TW
• Published: 2010
• Online Access: http://ndltd.ncl.edu.tw/handle/32992285178096476092

碩士 === 國立中正大學 === 應用數學研究所 === 98 === In the past study of convertible bonds, when it comes to conversion, we may assume that convertible bonds will never be converted except at maturity or call. In this article, we consider the investors’ initiative conversion strategy. Starting with the perspective of investors, we first calculate the best conversion threshold through real option and provide a suggested conversion strategy for convertible bonds not called by firm. If the stock return achieves the threshold before maturity, we may set the timing as the optimal conversion timing. In the second part, adopting the perspectives of firms, we forecast the true term to maturity of the convertible bonds by estimating, through first passage model, the dividend policy and return on stock in the next few years, under the assumption that most investors follow the optimal conversion strategy mentioned in the first part. In this study on optimal conversion strategy and true term to maturity, we hope to offer the firms some suggestions for outlining convertible bond contact and capital budget in the next few years.