Investors in South Korea have lost money in a complex derivative linked to constant maturity swap.  In search for higher yields, they are also putting money into another complex financial instrument, convertible bonds. Bloomberg recently reported, Sales of convertibles, which pay low coupons and let investors convert into stock if …

About a year ago, the financial world witnessed another  “Lehman moment”. It was the “near collapse” of Deutsche Bank (DB).  The financial press quickly pointed out the main reason for DB’s plunging stock price. John Glover wrote Yield-starved investors bought $102 billion of the contingent convertible bonds, securities created to …

What is a convertible bond? A convertible bond (or preferred share) is a hybrid security, part debt and part equity. Its valuation is derived from both the level of interest rates and the price of the underlying equity. Several convertible bond pricing approaches are available to value these complex hybrid …