Pricing Convertible Bonds with Default Risk: A Duffie-Singleton Approach

Akihiko Takahashi, Takao Kobayashi () and Naruhisa Nakagawa
Additional contact information
Akihiko Takahashi: Graduate School of Mathematical Science, University of Tokyo
Naruhisa Nakagawa: Equity Division, Goldman Sachs (Japan), Ltd.

No CIRJE-F-140, CIRJE F-Series from CIRJE, Faculty of Economics, University of Tokyo

Abstract: We propose a new method to value convertible bonds(CBs). In particular, we explicitly take default risk into consideration based on Duffie-Singleton(1999), and provide a consistent and practical method for relative pricing of securities issued by a firm such as CBs, non-convertible corporate bonds and equities. Moreover, we show numerical examples using Japanese CBs' data, and compare our model with other practical models.

Pages: 34 pages
Date: 2001-11
New Economics Papers: this item is included in nep-fmk
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Citations: View citations in EconPapers (27)

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