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Title: Pricing convertible bonds with equity, interest and credit risk
Author: Patel, Priyesh K.
ISNI:       0000 0004 2743 3754
Awarding Body: Imperial College London
Current Institution: Imperial College London
Date of Award: 2007
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This thesis presents a model to price convertible bonds. It is the first model to my knowledge that combines a stock price tree calibrated to the implied volatility surface with an interest rate model of the users choice and a probability of default as a proxy for credit risk. The aim was to develop a pricing model which enables security pricing for hybrid derivatives with equity, interest and default risk, using observable market inputs from the equity and bond markets. The model gives the user the flexibility to choose any interest rate model they desire. Normally convertible bond models implemented on a finite difference grid or a 2 factor 3-D tree are restricted to Markovian interest rate models which can be implemented via a recombining lattice. The latest advances in interest rate modelling in the form of multi-factor HJM and Libor Market Models, that are now becoming increasing popular by practitioners, however tend to be non Markovian. The implementation of these models is restricted to inefficient non-recombining lattices/trees or Monte Carlo simulations.
Supervisor: Not available Sponsor: Not available
Qualification Name: Thesis (Ph.D.) Qualification Level: Doctoral
EThOS ID:  DOI: Not available