Pricing and empirical analysis of convertible bonds with equity dilution and default risk
The pricing processes of the stock and corporate assets for convertible bonds follow the Markov regime-switching model,while taking the equity dilution effect and de-fault risk into account.This study aims to obtain a pricing formula for convertible bonds using change of measure and risk-neutralized pricing theory.Theoretical and numerical analyses show that the introduction of the Markov modulation model and the equity dilu-tion effect can prevent the overvaluation of convertible bonds.The findings also indicate that convertible bond values differ obviously under various initial economic states.
万方数据
维普
