Convertible Bond Pricing - SolvencyAnalytics

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. As convertibles are sensitive to a variety of market risk fac-tors defined under Solvency II s standard model ( interest rate, spread, equity, currency)and exhibit various optional features, a thorough understanding of different Convertible pricingfunctions is needed.

Asia (and a few but quite interesting issues from other regions) with all major sectors being rep-resented. In the exceptionally low interest rate environment this asset class’s popularity has ... Bond Floor (BF): This is the present value of the cash flows of the convertible bond while ne-

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  Issue, Bond, Convertible, Convertible bonds

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