The Handbook of Convertible Bonds (PDF)

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

Jan De Spiegeleer (Geneva, Switzerland) is Head of Risk
Management at Jabre Capital Partners, a Geneva-based hedge fund. He
developed an extensive knowledge of derivatives pricing, hedging
and 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 an
officer in the Belgian Army, and served in Iraq.

Wim Schoutens (Leuven, Belgium) is a research professor
in financial engineering in the Department of Mathematics at the
Catholic University of Leuven, Belgium. He has extensive practical
experience of model implementation and is well known for his
consulting work to the banking industry and other institutions. Wim
is the author of Lévy Processes in Finance and
Lévy Processes in Credit Risk, and co-editor of
Exotic Option Pricing and Advanced Lévy Models all
published by John Wiley and Sons. He is Managing Editor of the
International Journal of Theoretical and Applied Finance and
Associate Editor of Mathematical Finance, Quantitative
Finance and Review of Derivatives Research.

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