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Re: Proposed change to Convertible Bond model

Posted by Luigi Ballabio on Jun 11, 2007; 9:28am
URL: http://quantlib.414.s1.nabble.com/Proposed-change-to-Convertible-Bond-model-tp9499p9507.html

On Thu, 2007-05-31 at 11:30 +0000, John Maiden wrote:
> Does anyone know the purpose of the Soft Callability class? It's defined in
> convertiblebond.hpp and implemented in discretizedconvertible.cpp. I'm asking
> because as far as I know, call triggers are typically tied to a period of time,
> e.g. stock price above 120% for 20 out of 30 days. In its implementation in
> QuantLib, it simply acts as a potential additional call at each node, and thus
> inflates the overall price of the bond.

At this time, there's no time period where the trigger condition has to
hold; it's just checked at the callability date. I agree it should be
fixed. However, the price increase might not be as high as you make it;
unless I'm mistaken, the additional call is not at each node, but only
at the node corresponding to the callability date.

Later,
        Luigi


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