Valuation of Convertible Bonds when Investors Act Strategically

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

1 Introduction.- 2 Convertible Bonds: Markets, Motives, and Traditional Valuation.- 2.1 The German Convertible Bond Market.- 2.2 Motives for the Use of Convertible Bonds.- 2.3 Valuation of Convertible Bonds.- 2.4 Analysis of Observed Conversion Volume.- 3 General Framework for the Analysis of Convertible Bonds.- 3.1 Model Framework.- 3.2 Asset Pricing in the Presence of Interest Rate and Firm Value Uncertainty.- 3.3 Basic Relations between Asset Values.- 4 Optimal Conversion Strategies and Valuation of Convertible Bonds at Maturity.- 4.1 Block Conversion.- 4.2 Unrestricted Conversion.- 4.3 Monopolistic Conversion.- 4.4 Analysis without additional Debt.- 5 Optimal Conversion Strategies and Valuation of Convertible Bonds before Maturity.- 5.1 Block Conversion.- 5.2 Unrestricted Conversion.- 5.3 Monopolistic Conversion.- 5.4 Analysis without additional Debt.- 6 Comparison of the Results for the three Conversion Variants.- 6.1 Analysis at Maturity of the Convertible Bond.- 6.2 Analysis before Maturity of the Convertible Bond.- 6.3 Analysis without additional Debt.- 7 Optimal Conversion Strategies and Valuation of Convertible Bonds in a Multi Period Framework.- 7.1 Optimal Conversion Strategies and Valuation of Convertible Bonds at an Arbitrary Point in Time.- 7.2 Comparison of the Results for the three Conversion Variants at an arbitrary Point in Time.- 7.3 Relations between the Conversion Strategies and between the Asset Values over Time.- 8 Conclusion.