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Reverse Convertible Bonds Analyzed by Marta Szymanowska; Jenke Ter Horst; Chris Veld is a Economics, Econometrics and Finance article available to read on EtoBox.

What is Reverse Convertible Bonds Analyzed about?

## 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 RC 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%. © 2009 Wiley Periodicals, Inc. Jrl Fut Mark 29:895–919, 2009

Who reads Reverse Convertible Bonds Analyzed?

Author

Marta Szymanowska; Jenke Ter Horst; Chris Veld

Publisher

John Wiley and Sons; Wiley (John Wiley & Sons); John Wiley & Sons Inc.; Wiley (ISSN 0270-7314)

Published

2009

Language

EN

Field

Economics, Econometrics and Finance (Social Sciences)