WHAT'S NEW?

FINANCIAL MARKET COURSES

Convertibles – Introduction to Convertible Valuation

Convertible bonds are hybrid instruments with characteristics of both traditional bonds and equities. Valuation of convertibles reflects this dual nature. A convertible can be seen as a combination of a non-convertible bond and a call option. When this option is out of the money, the convertible trades (and is valued) as a non-convertible bond. When the option is deep in the money, the convertible will trade and be priced as the underlying stock. Pricing a convertible that is at the money is more complex and requires the use of sophisticated option pricing methods.

 

This course outlines how convertibles are priced and also the factors that influence their prices.

  • OBJECTIVES

    On completion of this course, you will be able to:

    Understand the factors that affect convertible prices

    Outline the basic concepts in the valuation of convertible bonds

  • COURSE OUTLINE

    Topic 1: Factors that influence the Price of a Convertible

    Underlying Stock Price

    Maturity

    Interest Rates Dividend Yield

    Volatility

    Credit Rating

    Investor Call Protection

    Investor Put

    Liquidity

    Topic 2: Valuation of a Convertible

    Bond Value and Lower Bounds on the Convertible Price

    Straight Bond Value (Investment Value)

    Corporation Performing Well

    Corporation in Financial Distress

    Conversion Value

    Convertible Bond and Premium

    Risk Premium

    Conversion Premium

    Convertible Price Behavior

    Topic 3: Convertible Price Sensitivity: Parity Delta and Gamma

    Parity Delta

    Parity Gamma

    Valuing the Embedded Call Option of a Convertible

    Convertible Bond Valuation and Call and Put Options

  • PREREQUISITE KNOWLEDGE

  • ESTIMATED COMPLETED TIME

    60 Minutes

Next Course

VIEW COURSE

INTERMEDIATE

Support

Accreditations

General: info@intuition.com

Accounts: ar@intuition.com

http://support.intuition.com

Intuition engages with over 30 accreditation bodies to ensure Know-How can be used for CPE credits. If your organization needs CPE from a body not listed below, contact us and we will endeavour to have them included.

© Copyright 2016 by Intuition. All Rights Reserved.