An Introduction to Interest Rate Sensitivity of Convertible Bonds

George A. Philips

Chapter 5 in Convertible Bond Markets, 1997, pp 59-85 from Palgrave Macmillan

Abstract: Abstract A convertible bond is a hybrid instrument. It has both a fixed income and an equity component. The degree by which it resembles either a straight bond or the underlying equity is largely dependent on how much the derivative is ‘in or out of the money’. Convertible bonds reflect differing sensitivities to changes in prevailing interest rates depending on their equity or straight bond content. Before analysing the characteristic behaviour of convertible bonds, we will focus exclusively on the impact of changing interest rates on straight bonds, but even at this point it needs to be noted that one is ultimately considering convertible bonds (many of which have put and call provisions) as securities with ‘embedded options’. This chapter provides a convenient place to at least outline basic bond theory and relationships which are essential for convertible bond practitioners.

Keywords: Interest Rate; Cash Flow; Yield Curve; Share Price; Bond Price (search for similar items in EconPapers)
Date: 1997
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-1-349-14385-6_5

Ordering information: This item can be ordered from
http://www.palgrave.com/9781349143856

DOI: 10.1007/978-1-349-14385-6_5

Access Statistics for this chapter

More chapters in Palgrave Macmillan Books from Palgrave Macmillan
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().