|Appears in Collections:||Accounting and Finance Journal Articles|
|Peer Review Status:||Refereed|
|Title:||An Empirical Comparison of Convertible Bond Valuation Models|
convertible bond valuation models
|Publisher:||Wiley-Blackwell / Financial Management Association International|
|Citation:||Zabolotnyuk Y, Jones R & Veld C (2010) An Empirical Comparison of Convertible Bond Valuation Models, Financial Management, 39 (2), pp. 675-706.|
|Abstract:||This paper empirically compares three convertible bond valuation models. We use an innovative approach where all model parameters are estimated by the Marquardt (1963) algorithm using a subsample of convertible bond prices. The model parameters are then used for out-of-sample forecasts of convertible bond prices. The mean absolute deviation is 1.86% for the Ayache-Forsyth-Vetzal (2003) model, 1.94% for the Tsiveriotis-Fernandes (1998) model, and 3.73% for the Brennan- Schwartz (1980) model. For this and other measures of fit, the Ayache-Forsyth- Vetzal (2003) and Tsiveriotis-Fernandes (1998) models outperform the Brennan- Schwartz (1980) model.|
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Simon Fraser University
University of Stirling
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