A Conditional Markov Model for Pricing Contingent Convertibles

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http://urn.fi/URN:NBN:fi:hulib-201801101008
Title: A Conditional Markov Model for Pricing Contingent Convertibles
Author: Puranen, Ilari
Contributor: University of Helsinki, Faculty of Science
Thesis level: master's thesis
Abstract: We introduce a new model for contingent convertibles. The write-down, or equity conversion, and default of the contingent convertible are modeled as states of conditional Markov process. Valuation formulae for di erent nancial contracts, like CDS and di erent types of contingent convertibles, are derived. The Model can be thought of as an extension to reduced form models with an additional state. For practical applications, this model could be used for new type of contingent convertible derivatives in a similar fashion than reduced form models are used for credit derivatives.
URI: URN:NBN:fi:hulib-201801101008
http://hdl.handle.net/10138/230946
Date: 2018-01-11
Discipline: Matematiikka


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