Transcription of Convertible Bond Pricing - Solvency Analytics
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Convertible Bond Pricing - Solvency Analytics
Convertible Bond PricingWorking Paper Series2015-10 (01) 2015 Convertible Bond PricingBal azs Mez 2015 Convertible bond investments may have a special role under Solvency II and the SwissSolvency Test as they are favoured over equities due to their convex payoff profile. Es-pecially under Solvency II, replacing equities by an optimized Convertible bond portfoliocan reduce the Solvency capital requirement (SCR) significantly while keeping risk/return char-acteristics virtually unchanged. Therefore, we believe that for small and mid size insurancecompanies where constraints on investment volume are less relevant, Solvency II optimizedconvertible bond strategies will be an attractive alternative to formulating such investment strategies Convertible bond Pricing functions have to becorrectly implemented and tested.
pecially under Solvency II, replacing equities by an optimized convertible bond portfolio can reduce the solvency capital requirement (SCR) significantly while keeping risk/return char-acteristics virtually unchanged. Therefore, we believe that for small and mid size insurance ... 1 Introduction to the Pricing of Convertible Bonds 5
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