Conver tible bonds are bonds issued by companies that have an embedded option that entitles the holder to exchange the bond for a predefined amount of equity in the company at a specified price. In some countries conver tible bonds are referred to as debentures. The price of such a conver tible bond is given [...]
Archive of posts tagged Bonds
Putable Bonds
Putable bonds are the opposite of callable bonds and entitle the holder of the bonds to sell them back to the issuer before the maturity date. This is equivalent to the issuer of the bond writing a put option:
Value of putable bond = Value of equivalent straight bond + Value of put option
The put option [...]
Callable Bonds
Some cor porate bonds are issued as callable bonds. These are bonds issued that contain an option exercisable at the discretion of the issuer to “call” or redeem the bond at a par ticular price. The exact call conditions are often more complicated than this but we will look at the case of a single [...]