Simulation-Based Pricing of Convertible Bonds

  title={Simulation-Based Pricing of Convertible Bonds},
  author={Manuel M. Ammann and Axel H. Kind and Christian Wilde},
  journal={European Finance},
We propose and empirically study a pricing model for convertible bonds based on Monte Carlo simulation. The method uses parametric representations of the early exercise decisions and consists of two stages. Pricing convertible bonds with the proposed Monte Carlo approach allows us to better capture both the dynamics of the underlying state variables and the rich set of real-world convertible bond specifications. Furthermore, using the simulation model proposed, we present an empirical pricing… 

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