Convertible Bonds

Posted by John Maiden on Apr 18, 2007; 10:46pm
URL: http://quantlib.414.s1.nabble.com/Convertible-Bonds-tp784.html

I've been playing with the Convertible Bond class, and have a question about its
implementation. This is probably due more to my lack of knowledge of the finance
than anything else.

The convertible bond model in ConvertibleBonds.cpp says it uses the
Tsiveriotis-Fernandes method, but the implementations of the model (from what
I've read in Ayache, Forsyth, and Vetzal, and Lucy Li's master's thesis (see
Wikipedia on Convertible bonds for the link)) all use a grid of stock prices and
times to determine the PDEs. The bond pricing engine in QuantLib seems to use
binomial trees to determine the price. Can anyone explain the discrepancy?


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