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Fair Value of a Convertible Bond

In: Convertible Bond Markets

Author

Listed:
  • George A. Philips

Abstract

We did not initially intend writing so early about how to derive a theoretical or ‘fair’ price for a convertible bond. Such a subject is usually demoted to the latter part of a book so as not to put off the reading audience. But what is the point of writing a book on converts if it is not explained how to perform one of the most important tasks. It should be made clear how to price the instruments under consideration, so that investors may rank them, say which ones offer better value than others, or which ones are more suitable for equity participants, hedgers, or straight bond players. The fact is that we can spend the next one hundred pages raving on about premium and all kinds of second rate statistics, and all we will have is second rate results.

Suggested Citation

  • George A. Philips, 1997. "Fair Value of a Convertible Bond," Palgrave Macmillan Books, in: Convertible Bond Markets, chapter 4, pages 38-58, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-1-349-14385-6_4
    DOI: 10.1007/978-1-349-14385-6_4
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