Valuation of Convertible Bonds when Investors Act Strategically

1. Front Matter

   Pages I-XVII

   PDF

2. Introduction

   • Christian Koziol

   Pages 1-4

3. Convertible Bonds: Markets, Motives, and Traditional Valuation

   • Christian Koziol

   Pages 5-32

4. General Framework for the Analysis of Convertible Bonds

   • Christian Koziol

   Pages 33-49

5. Optimal Conversion Strategies and Valuation of Convertible Bonds at Maturity

   • Christian Koziol

   Pages 51-87

6. Optimal Conversion Strategies and Valuation of Convertible Bonds before Maturity

   • Christian Koziol

   Pages 89-137

7. Comparison of the Results for the three Conversion Variants

   • Christian Koziol

   Pages 139-156

8. Optimal Conversion Strategies and Valuation of Convertible Bonds in a Multi Period Framework

   • Christian Koziol

   Pages 157-185

9. Conclusion

   • Christian Koziol

   Pages 187-190

10. Back Matter

    Pages 191-205

    PDF

The large volume of literature on convertible bonds addresses two basic complexes of problems: • Why and under which conditions do firms issue convertible bonds? • What is the fair value of a convertible bond? Christian Koziol's dissertation deals with the second problem. His dissertation differs from the predominant part of the literature in two aspects. First, he explicitly considers the strategic character of the conversion decision, as the timing and the volume of con­ version affect the wealth of the stockholders and the remaining convertible bond holders. Second, he deals with a more general capital structure, where the firm has subordinated debt outstanding in addition to convertible bonds and stocks. Within this setting, he characterizes and analyzes the optimal conversion strategy and the endogenous prices of convertible bonds, stocks, and the additional debt for three cases: all convertible bonds are held by a monopolist, the convertible bond holders act competitively, and the compet­ itive bond holders are constrained to convert their bonds in one block. The third variant is typical for the option-theoretic valuation of convertible bonds that uses the typical high contact condition for American options.

• Aktienbesitzer
• Convertible Bonds
• Strategic Conversion
• corporate finance
• option pricing
• valuation

Dr. Christian Koziol ist wissenschaftlicher Assistent bei Prof. Dr. Dr. h.c. Wolfgang Bühler am Lehrstuhl für Finanzierung der Universität Mannheim.

Policies and ethics