Price convertible bonds from EQP binomial tree
[
prices convertible bonds from an EQP binomial tree using a credit spread or incorporating the
risk of bond default.Price
,PriceTree
,EquityTree
,DebtTree
]
= cbondbyeqp(___,Name,Value
)
To incorporate the risk in the form of credit spread (Tsiveriotis-Fernandes method), use
the optional name-value pair input argument Spread
. To incorporate default
risk into the algorithm, specify the optional name-value pair input arguments
DefaultProbability
and RecoveryRate
.
cbondbycrr
, cbondbyeqp
, cbondbyitt
, and cbondbystt
return price information in the form of a
price vector and a price tree. These functions implement the risk in the form of either a credit
spread or incorporating the risk of bond default. To incorporate the risk in the form of credit
spread (Tsiveriotis-Fernandes method), use the optional name-value pair argument
Spread
. To incorporate default risk into the algorithm, specify the
optional name-value pair arguments DefaultProbability
and
RecoveryRate
.
[1] Tsiveriotis, K., and C. Fernandes. “Valuing Convertible Bonds with Credit Risk.” Journal of Fixed Income. Vol. 8, 1998, pp. 95–102.
[2] Hull, J. Options, Futures and Other Derivatives. Fourth Edition. Prentice Hall, 2000, pp. 646–649.
cbondbycrr
| crrsens
| eqpprice
| eqpsens
| eqptree
| instadd
| instcbond
| instdisp
| intenvset
| stockspec