Analytic Space

Convertible Bond pricing models

SciComp’s industry standard CB pricing models include, but are not limited to:

• Black-Scholes
• Local volatility models (LV)
• Stochastic volatility models (SV)
• Stochastic local volatility models (SLV)

Convertible Bond Contract Features

The partial, representative list below only hints at the infinite variety of contract features available with SciComp solutions. With SciFinance, customers can edit the provided specifications to add/modify contract features. SciFinance users can also write specifications from scratch to develop completely customized CB models. SciComp Consulting customers can request any CB model features they wish.

• Fixed, proportional, or mixed fixed/proportional dividend models
• Hazard rates calibrated from CDS spreads (or exogenous user input)
• Fixed, floating or mixed fixed/floating coupon models. Explicit coupon date schedules or built internally
• Discrete put schedules
• Separate treasury and benchmark curves
• Convertible bonds written on foreign stocks
• Hard call and discrete put schedules
• M of N soft calls with arbitrary number of days for the soft call trigger and soft call window including time variable call price/protection price schedules
• Contingent conversion (COCOs), conversion ratio resets, with pertinent parameters time variable according to user defined schedules
• Many types of make whole provisions including make whole conversion ratio adjustment matrices and change of control provisions
• Funding spread, borrow rate, choice of day count basis and holiday calendar support, switches for inclusion of accrued interest upon call, conversion, put, or default
• Transaction costs
• Wide variety of grid, solvers, algorithm choices for fastest/most accurate possible code
• Sensitivity to any model parameter e.g., all standard Greeks, interest, hazard, credit spread curve sensitivities, and market implied quantities
• Custom user defined features