GSO Spring Speaker 2007

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Convertible Bonds as Dynkin Games: A Monte Carlo Approach

Rene Carmona
Professor
Paul Wythes '55 Professor of Engineering and Finance Director of Graduate Studies of the Bendheim Center of Finance Department of Operations Research & Financial Engineering Princeton University Joint with Research Colloquium

Start Date and Time: Thu, 8 Feb 2007, 4:30 PM

End Date and Time: Thu, 8 Feb 2007, 6:00 PM

Venue: MATH 175

Abstract:

Convertible bonds are hybrid securities with a fixed income component as well as an equity component. After a short literature review and a thorough discussion of the numerical methods currently in use, we recast these instruments in the framework of Dynkin games, and we describe a new valuation method based on Monte Carlo calculations.

The emphasis of the talk is on numerical valuation, so the models are presented and discussed in discrete time, and implementation issues are addressed. 

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