Convertible bond valuation in a jump diffusion setting with stochastic interest rates
提出了一个可转换债券的统一定价框架，包含公司价值的指数跳跃扩散、相关的随机利率变动和高效数值定价方案，并分析了最优赎回政策的影响。
This paper proposes an integrated pricing framework for convertible bonds, which comprises firm value evolving as an exponential jump diffusion, correlated stochastic interest rates movements and an efficient numerical pricing scheme. By construction, the proposed stochastic model fits in the framework of affine jump diffusion processes of Duffie et al. [Econometrica, 2000, 68, 1343–1376] with tractable behaviour. We define the firm’s optimal call policy and investigate its impact on the computed convertible bond prices. We illustrate the performance of the numerical scheme and highlight the effects originated by the inclusion of jumps, stochastic interest rates and a non-zero correlation structure between firm value and interest rates.