Abstract
This paper analyzes corporate bond valuation of a straight bond, and the convertibility feature, when interest rates are stochastic and the firm value is determined by the interaction of a series of stochastic variables. The sensitivity of the corporate debt value to some key parameters is also explored. The methodology applied here is based on a hybrid of simulation and dynamic programming proposed by Raymar and Zwecher in 1997 to value financial American-type options. This methodology proves to be extremely efficient to value American-type options when the sources of uncertainty are numerous.
Original language | English |
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Pages (from-to) | 345-360 |
Number of pages | 16 |
Journal | Cuadernos de Economia - Latin American Journal of Economics |
Volume | 41 |
Issue number | 124 |
State | Published - 2004 |
Externally published | Yes |
Keywords
- Bond
- Equity
- Options
- Valuation