The Handbook of Convertible Bonds: Pricing, Strategies and Risk Management - Hardcover

De Spiegeleer, Jan; Schoutens, Wim

Hardcover

ISBN 10: 0470689684 ISBN 13: 9780470689684

Publisher: Wiley, 2011

Synopsis

This is a complete guide to the pricing and risk management ofconvertible bond portfolios. Convertible bonds can be complexbecause they have both equity and debt like features and new marketentrants will usually find that they have either a knowledge offixed income mathematics or of equity derivatives and thereforehave no idea how to incorporate credit and equity together intotheir existing pricing tools.

Part I of the book covers the impact that the 2008 credit crunchhas had on the markets, it then shows how to build up a convertiblebond and introduces the reader to the traditional convertiblevocabulary of yield to put, premium, conversion ratio, delta,gamma, vega and parity. The market of stock borrowing and lendingwill also be covered in detail. Using an intuitive approach basedon the Jensen inequality, the authors will also show the advantagesof using a hybrid to add value - pre 2008, many investors labelledconvertible bonds as 'investing with no downside', there are ofcourse plenty of 2008 examples to prove that they were wrong. Theauthors then go onto give a complete explanation of the differentfeatures that can be embedded in convertible bond.

Part II shows readers how to price convertibles. It covers thedifferent parameters used in valuation models: credit spreads,volatility, interest rates and borrow fees and Maturity.

Part III covers investment strategies for equity, fixed incomeand hedge fund investors and includes dynamic hedging andconvertible arbitrage.

Part IV explains the all important risk management part of theprocess in detail.

This is a highly practical book, all products priced are realworld examples and numerical examples are not limited tohypothetical convertibles. It is a must read for anyone wanting tosafely get into this highly liquid, high return market.

About this title

From the Back Cover

Having both equity and debt like features, convertible bonds arehighly complex, challenging new market entrants to incorporatecredit and equity together into their existing pricing tools.

The Handbook of Convertible Bonds is a comprehensiveguide to the pricing and risk management of this highly profitableasset class in a post credit crunch setting.

Part I introduces the convertibles market, covering theimpact that the 2008 credit crunch has had on the markets. It showshow to build up a convertible bond and introduces the reader to thetraditional convertible vocabulary of yield to put, premium,conversion ratio, delta, gamma, vega and parity. The market ofstock borrowing and lending is also covered in detail. Using anintuitive approach based on the Jensen inequality, the authors alsoshow the advantages of using a hybrid to add value. The authorsthen go on to give the advantages of using a hybrid to add value.The authors then go on to give a complete explanation of thedifferent features that can be embedded in convertible bonds.Part II shows readers how to price convertibles, coveringthe different parameters used in valuation models: credit spreads,volatility, interest rates ad borrow fees and maturity. PartIII concludes the book by covering the all important riskmanagement part of the process in detail.

This is a highly piratical book, all products priced are realworld examples and numerical examples are not limited tohypothetical convertibles. It is a must read for anyone wanting tosafely get into this market.

From the Inside Flap

“The magnum opus of convertible bond market literature, ofexcellent practical value to market participants. The authorspresent a worthy and accessible review of all facets of thisimportant corporate finance instrument, and I recommend it to everycurrent and potential investor in convertible bonds.Bravo!” – Professor Moorad Choudhry, Department ofEconomics, London Metropolitan University

“The Handbook of Convertible Bonds covers the importantmarket and analytical aspects of the CB business. This is anessential reference work that delivers both breadth of subjectmatter and depth of detail.” – Paul Wilmott,mathematician, author, cheesemaker

Edition details

• Publisher: Wiley
• Publication date: 2011
• ISBN 10: 0470689684
• ISBN 13: 9780470689684
• Binding: Hardcover
• Language: English
• Edition number: 1
• Number of pages: 396