Analysis of Optimal Strategies of Convertible Bonds with the Game Theory Analysis of Options

摘要

In this paper, a zero-sum game of perfect information is constructed based on the game theory analysis of options to analyze the interaction between the optimal call strategy of the issuer and the optimal conversion strategy of the holders. Moreover,the critical determinants including coupon payment, dividend policy, call notice period requirement, hard and soft call constraints on the valuation and optimal strategies of convertible bonds are taken into account. In addition, the finite element method is adopted to solving the pricing model and the projected successive over-relaxation technique is used to handling the American constraint. The numerical results show that these determinants have significant effect on the optimal strategies of convertible bonds, which are important for the pricing and designing of convertible bond.