De Spiegeleer / Schoutens The Handbook of Convertible Bonds

Pricing, Strategies and Risk Management
1. Auflage 2011
ISBN: 978-1-119-97806-0
Verlag: John Wiley & Sons
Format: EPUB
Kopierschutz: Adobe DRM (»Systemvoraussetzungen)

E-Book, Englisch, 396 Seiten, E-Book

Reihe: Wiley Finance Series

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.

Autoren/Hrsg.

De Spiegeleer, Jan

Schoutens, Wim

Weitere Mitwirkende

Jabre, Philippe

Inhaltsverzeichnis

Reading this Book.
Preface.
Acknowledgements.
PART I THE CONVERTIBLES MARKET.
1 Terminology.
1.1 The Payoff.
1.2 Advantages of Convertibles.
1.3 Basic Terminology.
1.4 Advanced Terminology.
1.5 Legal Terminology.
1.6 Analytics and Hedge Ratios.
2 Convertible Bond Anatomy.
2.1 Payoff to the Investor.
2.2 Payoff Graph.
2.3 Boundary Conditions.
2.4 Effect of the Call Protection.
2.5 Announcement Effect.
3 Convertible and Hybrid Structures.
3.1 Preferred Shares.
3.2 Convertible Bond Option.
3.3 Reverse Convertible.
3.4 Perpetuals.
3.5 Cross-Currency.
3.6 Mandatory.
3.7 Cashout Option.
3.8 Exchangeable.
3.9 Dividend Entitlement.
4 Convertible Bonds Market.
4.1 The Convertible Universe.
4.2 The Prospectus.
4.3 The Investors.
4.4 Market Participants.
4.5 New Issuance.
PART II PRICING.
5 The Road to Convexity.
5.1 Break-Even Analysis.
5.2 Discounted Yield Advantage.
5.3 Convexity.
5.4 Jensen's Inequality.
5.5 Time Decay.
5.6 Double-Signed Gamma.
5.7 Colour.
5.8 First Steps Using Convexity.
6 Basic Binomial Trees.
6.1 Models.
6.2 The Basic Ingredients.
6.3 A Primer in Stochastic Calculus.
6.4 Elementary Credit Model.
6.5 Binomial Equity Models.
6.6 Pricing Convertibles Using Binomial Trees.
6.7 Credit Spread Modelling in Binomial Trees: A Practitioner's Approach.
6.8 Conclusions.
7 Multinomial Models.
7.1 Convergence of the Binomial Model.
7.2 Moments.
7.3 Multinomial Models.
7.4 Trinomial Model.
7.5 Heptanomial Model.
7.6 Further Optimization.
7.7 Other Refinements.
7.8 Resets in Multinomial Models.
8 Ascots.
8.1 Risk Components of a Convertible.
8.2 Asset Swaps.
8.3 Ascots.
8.4 Advantages for the Credit Buyer.
8.5 Advantages for the Ascot Buyer.
8.6 Pricing of Ascots.
8.7 Ascot Greeks.
8.8 CB Warrants.
PART III RISK MANAGEMENT AND STRATEGIES.
9 Measuring the Risk.
9.1 Portfolio Risk.
9.2 A Portfolio in Trouble.
9.3 Risk Categories.
9.4 Coherent Risk Measures.
9.5 Option Greeks.
9.6 Fixed Income Measures.
9.7 Cross Greeks.
9.8 Speed and Colour.
9.9 VaR and Beyond.
9.10 Back Testing.
9.11 Stress Testing.
10 Dynamic Hedging.
10.1 Hedge Instruments.
10.2 Delta Hedging.
10.3 Volatility.
10.4 Gamma Trading.
10.5 The Variance Swap.
11 Monte Carlo Techniques for Convertibles.
11.1 Adding More Realism.
11.2 Monte Carlo Method.
11.3 American Monte Carlo.
References.
Index.

Über Autor(innen)

Jan De Spiegeleer (Geneva, Switzerland) is Head of RiskManagement at Jabre Capital Partners, a Geneva-based hedge fund. Hedeveloped an extensive knowledge of derivatives pricing, hedgingand trading while working for KBC Financial Products in London,where he was Managing Director of the equity derivatives desk.Prior to his financial career, Jan worked for ten years as anofficer in the Belgian Army, and served in Iraq.
Wim Schoutens (Leuven, Belgium) is a research professorin financial engineering in the Department of Mathematics at theCatholic University of Leuven, Belgium. He has extensive practicalexperience of model implementation and is well known for hisconsulting work to the banking industry and other institutions. Wimis the author of Lévy Processes in Finance andLévy Processes in Credit Risk, and co-editor ofExotic Option Pricing and Advanced Lévy Models allpublished by John Wiley and Sons. He is Managing Editor of theInternational Journal of Theoretical and Applied Finance andAssociate Editor of Mathematical Finance, QuantitativeFinance and Review of Derivatives Research.