Valuation of Convertible Bonds when Investors Act Strategically

Name: Valuation of Convertible Bonds when Investors Act Strategically
Author: Christian Koziol

Paperback Engels 2004 9783824491322

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Samenvatting

The large volume of literature on convertible bonds addresses two basic complexes of problems: • Why and under which conditions do firms issue convertible bonds? • What is the fair value of a convertible bond? Christian Koziol's dissertation deals with the second problem. His dissertation differs from the predominant part of the literature in two aspects. First, he explicitly considers the strategic character of the conversion decision, as the timing and the volume of con version affect the wealth of the stockholders and the remaining convertible bond holders. Second, he deals with a more general capital structure, where the firm has subordinated debt outstanding in addition to convertible bonds and stocks. Within this setting, he characterizes and analyzes the optimal conversion strategy and the endogenous prices of convertible bonds, stocks, and the additional debt for three cases: all convertible bonds are held by a monopolist, the convertible bond holders act competitively, and the compet itive bond holders are constrained to convert their bonds in one block. The third variant is typical for the option-theoretic valuation of convertible bonds that uses the typical high contact condition for American options.

Specificaties

ISBN13:9783824491322

Taal:Engels

Bindwijze:paperback

Aantal pagina's:200

Uitgever:Deutscher Universitätsverlag

Druk:0

Hoofdrubriek:Financieel management, Financieel management

Serie:Beiträge zur betriebswirtschaftlichen Forschung

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Inhoudsopgave

1 Introduction.- 2 Convertible Bonds: Markets, Motives, and Traditional Valuation.- 2.1 The German Convertible Bond Market.- 2.2 Motives for the Use of Convertible Bonds.- 2.3 Valuation of Convertible Bonds.- 2.4 Analysis of Observed Conversion Volume.- 3 General Framework for the Analysis of Convertible Bonds.- 3.1 Model Framework.- 3.2 Asset Pricing in the Presence of Interest Rate and Firm Value Uncertainty.- 3.3 Basic Relations between Asset Values.- 4 Optimal Conversion Strategies and Valuation of Convertible Bonds at Maturity.- 4.1 Block Conversion.- 4.2 Unrestricted Conversion.- 4.3 Monopolistic Conversion.- 4.4 Analysis without additional Debt.- 5 Optimal Conversion Strategies and Valuation of Convertible Bonds before Maturity.- 5.1 Block Conversion.- 5.2 Unrestricted Conversion.- 5.3 Monopolistic Conversion.- 5.4 Analysis without additional Debt.- 6 Comparison of the Results for the three Conversion Variants.- 6.1 Analysis at Maturity of the Convertible Bond.- 6.2 Analysis before Maturity of the Convertible Bond.- 6.3 Analysis without additional Debt.- 7 Optimal Conversion Strategies and Valuation of Convertible Bonds in a Multi Period Framework.- 7.1 Optimal Conversion Strategies and Valuation of Convertible Bonds at an Arbitrary Point in Time.- 7.2 Comparison of the Results for the three Conversion Variants at an arbitrary Point in Time.- 7.3 Relations between the Conversion Strategies and between the Asset Values over Time.- 8 Conclusion.