|Appears in Collections:||Accounting and Finance Journal Articles|
|Peer Review Status:||Refereed|
|Title:||Reverse convertible bonds analyzed|
ter, Horst Jenke
|Keywords:||reverse convertible bonds|
reverse exchangeable securities
|Citation:||Szymanowska M, ter Horst J & Veld C (2009) Reverse convertible bonds analyzed, Journal of Futures Markets, 29 (10), pp. 895-919.|
|Abstract:||We study the pricing of reverse convertible (RC) bonds. These are bonds that carry high coupon payments. In exchange, the issuer has an option at the maturity date to either redeem the bonds in cash, or to deliver a pre-specified number of shares. We find that Dutch plain vanilla and knock-in reverse convertible bonds are, on average, overpriced by almost 6%. This overpricing is confirmed in a model-free analysis with respect to option- and bond- pricing models. We find that rational factors explain 23% of the documented overpricing. In addition, we find that the combination of financial marketing, framing, and the representativeness bias further increases our ability to explain the documented overpricing to more than 35%.|
|Rights:||The publisher does not allow this work to be made publicly available in this Repository. Please use the Request a Copy feature at the foot of the Repository record to request a copy directly from the author; you can only request a copy if you wish to use this work for your own research or private study.|
|Affiliation:||Erasmus University, Rotterdam|
University of Stirling
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