The pricing of convertible bonds in the presence of structured conversion clauses: the case of Cashes
by Marida Bertocchi; Vittorio Moriggia; Costanza Torricelli; Sebastiano Vitali
International Journal of Financial Engineering and Risk Management (IJFERM), Vol. 2, No. 2, 2015

Abstract: The aim of this paper is to analyse the pricing of highly structured convertible bonds by taking a real world case. To this end we examine the Cashes (Convertible And Subordinated Hybrid Equity-linked Securities), which are characterised by both voluntary and mandatory conversion that depend on different triggering events, as well as floating coupons whose payment hinges on dividends and earning of the issuer. Our results highlight that prices are very sensitive to the modelling of the sources of uncertainty, both market and credit risk, and underscore the relevance of the time horizon chosen for the estimation.

Online publication date: Sun, 03-Jan-2016

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