“The Handbook of Convertible Bonds covers the important market and analytical aspects of the CB business. This is an essential reference work that delivers both breadth of subject matter and depth of detail.” – Paul Wilmott, mathematician, author, cheesemaker
The Handbook of Convertible Bonds is a comprehensive guide to the pricing and risk management of this highly profitable asset class in a post credit crunch setting.
Part I introduces the convertibles market, covering the impact that the 2008 credit crunch has had on the markets. It shows how to build up a convertible bond and introduces the reader to the traditional convertible vocabulary of yield to put, premium, conversion ratio, delta, gamma, vega and parity. The market of stock borrowing and lending is also covered in detail. Using an intuitive approach based on the Jensen inequality, the authors also show the advantages of using a hybrid to add value. The authors then go on to give the advantages of using a hybrid to add value. The authors then go on to give a complete explanation of the different features that can be embedded in convertible bonds. Part II shows readers how to price convertibles, covering the different parameters used in valuation models: credit spreads, volatility, interest rates ad borrow fees and maturity. Part III concludes the book by covering the all important risk management part of the process in detail.
This is a highly piratical book, all products priced are real world examples and numerical examples are not limited to hypothetical convertibles. It is a must read for anyone wanting to safely get into this market.