Convertible Bonds

This forum is to discuss the book "the concepts and practice of mathematical finance" by Mark Joshi.

Convertible Bonds

Postby IchabodKunkleberry » Wed Dec 03, 2014 7:04 am

Am a neophyte at all these financial topics, so I'm trying to elucidate some of the notions with great care.

In Section 1.3.3 ("The corporate bond"), the following statement is made regarding convertible bonds...

"This allows the investor the upsides of both bonds and shares ..."

QUESTION : Does this mean that only share appreciation is the motivation for converting the bond to shares ?

It would seem that a bond holder could also take advantage of a rather precipitous fall in the share price, right ? That is,
it may be beneficial to accumulate shares when prices plunge. This would be rational if the bond holder believes that a sharp
fall in the share price is a temporary aberration and that there will be a significant recovery in share price.

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