Reverse convertible debt under credit risk

Rossella Agliardi ()
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Rossella Agliardi: Department of Mathematics, University of Bologna, Bologna, Italy

International Journal of Financial Engineering (IJFE), 2016, vol. 03, issue 01, 1-13

Abstract: In this paper, a new pricing formula for reverse convertible debt that properly accounts for the embedded credit risk is found. An analysis of the conversion and default thresholds is performed. This approach also suggests some possible explanations of the reverse convertible overpricing that is documented in the empirical literature.

Keywords: Structural approach; defaultable bonds; reverse convertibles; smooth pasting conditions (search for similar items in EconPapers)
Date: 2016
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DOI: 10.1142/S2424786316500079

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