Convertible bond
216387220
Profitable Price Impact: The Case of Convertible Bond Arbitrage
We investigate a potential source of profit to convertible bond arbitrageurs that is new to the literature: anticipatory hedging in advance of convertible bond issues. When the reference stock price in a bond contract is determined after a new issue is announced, anticipatory short selling in the underlying stock can result in "profitable price impact" (PPI) Downward stock price pressure prior to bond pricing creates an abnormally cheap embedded call option. Consistent with PPI, we document issuer stock price declines on bond pricing days that are more concentrated during the last hour of trading and are followed by partial adjustments.
Milad Nozari Michael J Pascutti Heather Tookes
219653698
The Announcement Effects of Convertible Bond Issuances and Refixing Conversion Prices
1) <Abstract> Using a sample of 1,421 convertible bond (CB) issuances announced between 2015 and 2018, this study examines the announcement effects of convertible bond issuances and refixing conversion prices (i.e. adjusting conversion price downward if stock price decreases after issuance) The major results are as follows: First, the announcement effect of CB issuances is significantly positive and the three day cumulative abnormal return is 4.66% Second, the announcement effect of CB issuances stating capital expenditures as the use of proceeds is significantly smaller than that of CB issuances stating other purposes. Third, the fact that the announcement effect of CB issuances with a refixing option is significantly smaller than that of those without a refixing option reflects the stock market's negative opinion of the refixing option. Fourth, consistent with the third result, the announcement effect of refixing is also significantly negative. To summarize, this study contributes to finance theory by presenting, for the first time, evidence to support the negative effects of refixing options that are extremely favorable to holders.
Pyung Sig Yoon
226192469
Arbitrage vs. informed short selling: Evidence from convertible bond issuers
Abstract Prior literature examines the effect of either informed or arbitrage short selling on equity markets. We test the relative importance of informed and uninformed short selling around convertible bond issues and earnings announcements for the same firms over the same time period. Convertible arbitrage short selling is associated with temporary price pressure, consistent with downward sloping demand curves. Earnings announcement short selling is consistent with informed traders who anticipate future returns. Firm specific characteristics related to the cost of short selling similarly affect both informed and arbitrage short selling. Deal specific characteristics capturing hedging demand also strongly determine convertible arbitrage short selling.
John Hackney Tyler R Henry Jennifer L Koski
226388261
Convertible bond arbitrage and short selling activity
The objective of this study is to examine the impact of convertible bond arbitrage activity onshort selling levels of the underlying equity. We exploit changes in Reg SHO reported shortsale data to identify convertible bond arbitrage related short selling activity. By furtherscrutinizing 335 convertible bonds around the issuance as well as for the period followingissuance. Results provide considerable evidence of arbitrage induced short selling for boththe period around the issuance and the post issue period. Moreover, deal specific charac teristics capturing hedging demand and attractiveness of the arbitrage opportunity stronglyrelate to convertible arbitrage short selling. Given our identification of short selling withdaily accuracy near the issuance, our paper highlights the benefits of applying empiricalprecision to the study of convertible bond arbitrage activity.
L van den Broek
225821824
Convertible Bond Valuation with Regime Switching
We provide an analytic valuation formula for convertible bonds with regime switching market conditions. We divide the convertible bond into a coupon bearing bond component and an American type exchange option component. We develop a new valuation method of the exchange option component by combining Margrabe (1978)'s exchange option valuation approach and Geske and Johnson (1984)'s pseudo American option valuation approach. A two state regime switching example shows the superiority of our model in both accuracy and computation speed compared to the Monte Carlo simulation method.
B J Kim Bong-Gyu Jang
225725562
Convertible Bond Pricing Based on Variance Gamma Model
Due to the 'spike and tail' phenomenon of asset returns, the applicability of the Black Scholes model for pricing convertible bonds has been questioned, and the variance gamma model can cope well with this phenomenon and solve the 'volatility smile dilemma' This paper combines the variance gamma model with the least squares Monte Carlo simulation method to empirically analyze the Everbright convertible bonds based on its high activity in the Chinese market. In this paper, the theoretical price and the actual price are compared, and the applicability of the variance gamma model in the Chinese convertible bond market is analyzed. The empirical results show that the fitting price obtained by the variance gamma model is consistent with the actual price trend, indicating that the method is applicable to the Chinese convertible bond market.
Min-Tsung Cheng Yubo Li
219055324
The Analysis of Chinese Convertible Bond Market
Convertible bond is a type of hybrid security with both bond and stock like features. The Chinese market of convertible bonds has developed dramatically during the last decade. This paper will conduct a comprehensive analysis of this market. Firstly, a brief introduction of convertible bond and the historical evolution of this market in China is presented, then we analyze various investment risks related to convertible bonds. Next, this paper proposes the basic valuation model for convertible bonds, which is the Black Scholes model and modifies it by taking the delusion effect of conversion into account, leading to the Gailai Schneller model. In addition, the differences of the outcomes obtained by these two models are compared and analyzed based on the pricing of Shanghai Electric convertible bond. In the sixth part, this paper mainly explains two types of applications of convertible bonds in portfolio management. In the end, several problems existing in Chinese convertible market as well as some suggestions for solving them are discussed.
Yu-xin Tian Jun Chen
229203671
Research on the Risks and Countermeasures of Convertible Bond Financing Take Jiangnan Convertible Bonds as an Example
Convertible bonds are one of the important ways for enterprises to raise funds. This article takes Jiangnan convertible bond financing as the research object. Based on the thinking and reflection on Jiangnan convertible bond financing failure, this article attempts to analyze the risks and equity conversion failures in Jiangnan convertible bond financing the reason. First of all, this article sorts out the phenomenon of low conversion rate of Jiangnan convertible bonds. Secondly, it analyzes the risks in the financing of convertible bond financing. Finally, in order to effectively prevent the financing risks of convertible bonds. This article gives corresponding countermeasures and suggestions from three levels: the macro environment, the company itself, and the design of the issuance of convertible bonds.
Zhong Cheng Jiao Wang
225447555
Analysis of Convertible Bond Investment Value
Zhaoyang Liu
228945634
A Study on the Investment Effect of Convertible Bond
Sunjung Kim