Pricing a Defaultable Convertible Bond by Simulation시뮬레이션에 의한 부도위험 전환사채 가격결정
- Other Titles
- 시뮬레이션에 의한 부도위험 전환사채 가격결정
- Authors
- 박기환; 정무권; 이상기
- Issue Date
- Sep-2017
- Publisher
- 한국증권학회
- Keywords
- Least Squares Simulation; Optimal Decision Rule; Marginal Default Probability; Recovery Ratio; Default-Triggering Stock Price Level; 최소자승 시뮬레이션; 최적 의사결정 규칙; 한계부도확률; 회수율; 부도주가수준
- Citation
- 한국증권학회지, v.46, no.4, pp.947 - 965
- Journal Title
- 한국증권학회지
- Volume
- 46
- Number
- 4
- Start Page
- 947
- End Page
- 965
- URI
- http://scholarworks.bwise.kr/ssu/handle/2018.sw.ssu/39287
- DOI
- 10.26845/KJFS.2017.09.46.4.947
- ISSN
- 2005-8187
- Abstract
- In this study, we offer a simple way to price a defaultable, convertible, and callable bond by applying the Longstaff-Schwartz Least Squares simulation method. In our model, the stock price is a driving force for valuing the security. A key idea is to terminate the simulated sample path immediately when the issuer defaults on the bond at time t, the same as when the investor and the issuer optimally exercise their option, and to discount back the resulting cash flows at a risk-free rate. In turn, the defaulted group of the sample paths belongs to a bottom x percentile of the realized stock prices at each time, which is exogenously given by the cumulative or marginal default probability of a firm equally rated as the issuer. We apply our simulation model to a zero-coupon, callable, convertible and defaultable bond and show that the price depends on its default probability and recovery ratio.
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