A mathematical study of convertible bonds.
Independent thesis Basic level (degree of Bachelor), 10 credits / 15 HE creditsStudent thesis
A convertible bond (CB) is a financial derivative, a so called hybrid security.
It is an issued contract from a company or a government, which is paid for
up-front. The contract yields a known amount at the specified maturity date,
unless the holder chooses to convert it into an amount of the underlying asset.
This kind of financial products can have complex features affecting the
contract price and the optimal exercising situation. The partial differential
equation (PDE) approach used for pricing financial derivatives makes it possible
to describe convertible bonds with a physical model, a reversed diffusion
described by a parabolic PDE. One can sometimes find both analytical and
numerical solutions for this type of PDEs and interpret the solutions from a
financial point of view, as they suggest predictable behaviour of the contract
Place, publisher, year, edition, pages
2014. , 63 p.
Convertible Bonds, Financial Derivative, Complex Features, Diffusion, Parabolic Partial Differential Equation.
Engineering and Technology
IdentifiersURN: urn:nbn:se:kth:diva-151312OAI: oai:DiVA.org:kth-151312DiVA: diva2:747831
Shahgholian, Henrik, Professor