Within a default intensity approach we discuss the optimal exercise of the callable and convertible bonds. Pricing bounds for convertible bonds are derived in an uncertain volatility model, i.e. when the volatility of the stock price process lies between two extreme values.

Within the structural approach for credit risk models we discuss the optimal exercise of the callable and convertible bonds. The Vasiĕk-model is applied to incorporate interest rate risk into the firm’s value process which follows a geometric Brownian motion. Finally, we derive pricing bounds...

The maturities of newly issued convertible bonds vary substantially over time. Firm-specific determinants of maturity from the straight debt literature are relevant for convertible bonds. However, the growth of the convertible arbitrage industry and the role of convertible arbitrage hedge funds...

In this work we introduce the notion of implied Core Equity Tier 1 volatility and the concept of a risk-adjusted distance to trigger. Using a derivatives-based valuation approach, we are able to derive the implied CET1 volatility from the market price of a CoCo bond in a Black-Scholes setting....

A mark-to-market approach for convertible bonds is proposed where the volatility from the bond optionality is implied from the traded credit spread and bond price. By linking the convertible bond implied volatility to the listed equity option implied volatility surface, the set of available...