Valuation of convertible bonds when investors act strategically

Koziol, Christian

Document Type: Doctoral dissertation
Year of publication: 2004
Place of publication: Wiesbaden
Publishing house: Dt. Univ.-Verl.
ISBN: 978-3-8244-9132-2 , 3-8244-9132-X , 978-3-322-82016-7
University: Universität Mannheim
Evaluator: Bühler, Wolfgang
Date of oral examination: 25 June 2003
Publication language: English
Institution: Business School > ABWL u. Finanzierung (Bühler 1990-2009, Em)
Subject: 330 Economics
Abstract: Convertible bonds are interest bearing securities that can be converted into stocks. Therefore, the investors' strategy is a fundamental pricing factor. It is particularly important whether a firm has debt outstanding in addition to convertible bonds and stocks, because the conversion decision results in a wealth transfer between debt and stock holders. Christian Koziol analyzes conversion strategies and the related values of stocks and convertible bonds when firms have additional debt outstanding. For this purpose, he applies a multi period framework in the presence of both firm value and interest rate uncertainty. He shows that various conversion strategies can be optimal, which result in different values for stocks and convertible bonds, depending on the underlying conversion variant, i.e. monopolistic conversion, perfect competition, or block conversion. A comparative static analysis examines the differences between the properties of the optimal conversion strategies and between the asset values for the three conversion variants. One of the - partly surprising - results is that the convertible bond value is highest under monopolist conversion and that the value under block conversion is lower than under perfect competition.
Additional information: Beiträge zur betriebswirtschaftlichen Forschung ; 110

Dieser Eintrag ist Teil der Universitätsbibliographie.

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