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A mathematical study of convertible bonds.
KTH, School of Engineering Sciences (SCI), Aeronautical and Vehicle Engineering.
2014 (English)Independent thesis Basic level (degree of Bachelor), 10 credits / 15 HE creditsStudent thesis
Abstract [en]

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.
Keyword [en]
Convertible Bonds, Financial Derivative, Complex Features, Diffusion, Parabolic Partial Differential Equation.
National Category
Engineering and Technology
URN: urn:nbn:se:kth:diva-151312OAI: diva2:747831
Available from: 2014-09-17 Created: 2014-09-17 Last updated: 2014-09-17Bibliographically approved

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