scholarly journals An Analytic Solution for a Vasicek Interest Rate Convertible Bond Model

2010 ◽  
Vol 2010 ◽  
pp. 1-5 ◽  
Author(s):  
A. S. Deakin ◽  
Matt Davison
Keyword(s):  
Differential Equation ◽  
Interest Rate ◽  
Stock Price ◽  
Analytic Solution ◽  
Integral Transforms ◽  
Convertible Bond ◽  
Motion Model ◽  
Bond Model ◽  
Brownian Motion Model ◽  
The Interest Rate

This paper provides the analytic solution to the partial differential equation for the value of a convertible bond. The equation assumes a Vasicek model for the interest rate and a geometric Brownian motion model for the stock price. The solution is obtained using integral transforms.

Omnicom's No-No (A)

2017 ◽  
pp. 1-15
Author(s):  
Todd Pulvino ◽  
James Litinsky
Keyword(s):  
Interest Rate ◽  
Stock Price ◽  
Central Issue ◽  
Convertible Bond ◽  
Tax Shield ◽  
Economic Rationale ◽  
Tax Deductions ◽  
The Interest Rate ◽  
Liquid Yield ◽  
Interest Expense

In February 2001, Omnicom, Inc.'s CFO Randall Weisenberger restructured Omnicom's liabilities by replacing a plain-vanilla convertible bond with a liquid yield option note (LYON). Omnicom's LYON was a “No-No,” a name that reflects the fact that the bond sold for par (NO accretion) even though it paid a 0% coupon (NO coupon) in most scenarios. To entice investors to buy this security, the LYON contained a conversion feature whereby investors could convert their bonds into common equity under certain circumstances. In addition, the Omnicom LYON contained a “co-pay” feature that reflected the fact that the interest rate payable to investors was contingent on Omnicom's stock price. The co-pay feature was a central issue in the case, as it allowed the corporation to treat the bonds under the Internal Revenue Service's Contingent Payment Debt Instrument rules. This effectively allowed the corporation to take large interest expense tax deductions even though no cash coupons were paid. The tax shield existed only as long as the bonds remained outstanding. However, the Omnicom LYON was putable and callable annually. In the event that investors put the bonds back to the company, the tax shield would be extinguished.To describe Omnicom's No-No and to provide a rich example for exploring the economic rationale for including various provisions in bond indentures.

Pricing Convertible Bond in Uncertain Financial Market

2021 ◽  
pp. 2150007
Author(s):  
Zhiqiang Zhang ◽  
Zhenfang Wang ◽  
Xiaowei Chen
Keyword(s):  
Differential Equation ◽  
Financial Market ◽  
Stock Price ◽  
Uncertainty Theory ◽  
Convertible Bonds ◽  
Convertible Bond ◽  
Uncertain Differential Equation ◽  
Numerical Examples ◽  
Liu Process ◽  
Uncertain Calculus

This paper is devoted to evaluating the convertible bonds within the framework of uncertainty theory. Under the assumption that the underlying stock price follows an uncertain differential equation driven by Liu process, the price formulas of convertible bonds and the callable convertible bonds are derived by using the method of uncertain calculus. Finally, two numerical examples are discussed.

scholarly journals PENGARUH INFLASI, SUKU BUNGA, DAN NILAI TUKAR TERHADAP INDEKS HARGA SAHAM GABUNGAN PERIODE 2016 – 2018

2021 ◽  
Vol 6 (1) ◽  
pp. 50-59
Author(s):  
Irine Melyani ◽  
Martha Ayerza Esra
Keyword(s):  
Exchange Rate ◽  
Interest Rate ◽  
Stock Price ◽  
Time Series Data ◽  
Secondary Data ◽  
Series Data ◽  
Future Research ◽  
Time Range ◽  
Important Indicator ◽  
The Interest Rate

The movement of stock price index is the important indicator for investors to determine whether the investor would sell, buy, or hold shares. The movement of CSPI is affected by several factor like macroeconomy. The purpose of this study was to determine the effect of inflation, interest rate, and exchange rate against CSPI. Theoretically, the effect of inflation, interest rate, and exchange rate is based on efficient market hyphothesis and signalling theory which inflation, interest rate and exchange rate provide signal to investor which affect their decision that cause change to CSPI. The type of data used in this study is secondary data with quantitative approach. The sampling is based on time series data from 2016-2018 using purposive sampling methodso that 36 samples are obtained. This research uses multiple uses multiple regression analysis method using SPSS 2.2. The results of this study indicate that during the period 2016-2018 inflation does not affect CSPI, the interest rate have negative affect on CSPI and exchange rate have positive affect on CSPI. Future research is expected to add another independent variable and extend the time range of the research to obtain ore accurate and comprehensive results. Keywords: Inflation, Interest Rate, Exchange Rate, Composite Stock Price Indonesia

scholarly journals PENGARUH SUKU BUNGA THE FED, HARGA MINYAK DAN INFLASI TERHADAP INDEKS HARGA SAHAM GABUNGAN (IHSG) DI BURSA EFEK INDONESIA

2018 ◽  
pp. 1261
Author(s):  
Gusti Ayu Diah Akua Miyanti ◽  
Luh Putu Wiagustini
Keyword(s):  
Interest Rate ◽  
Stock Price ◽  
Price Index ◽  
Linear Regression Analysis ◽  
Computer Software ◽  
Multiple Linear Regression Analysis ◽  
Oil Price ◽  
Negative Effect ◽  
Stock Price Index ◽  
The Interest Rate

Rise and fall of the price of a stock is strongly influenced by the economic conditions of a country. Price has an important role in influencing consumer decisions in buying a product including stocks. The purpose of this study was to examine the effect of Fed interest rate, oil price and inflation on Indonesian Joint Stock Price Index from January 2012 to December 2016. This research is an associative research that aims to determine the influence or relationship between two variables or more. Data processed using computer software that is SPSS (Statistical Package for Social Science). The test result through Multiple Linear regression analysis shows that the Fed interest rate, oil price and inflation simultaneously have a significant effect on the Composite Stock Price Index. Partially, the interest rate of the Fed has a significant positive effect on the Composite Stock Price Index in BEI, while the price of oil has a significant negative effect and inflation has no effect on JCI period 2012 -2016.

A TWO-FACTOR JUMP-DIFFUSION MODEL FOR PRICING CONVERTIBLE BONDS WITH DEFAULT RISK

2016 ◽  
Vol 19 (06) ◽  
pp. 1650046 ◽  
Author(s):  
RADHA KRISHN COONJOBEHARRY ◽  
DÉSIRÉ YANNICK TANGMAN ◽  
MUDDUN BHURUTH
Keyword(s):  
Interest Rate ◽  
Default Risk ◽  
Stock Price ◽  
Numerical Experiments ◽  
Diffusion Processes ◽  
Jump Diffusion ◽  
Convertible Bonds ◽  
Minor Effect ◽  
Jump Diffusion Model ◽  
The Interest Rate

The current literature on convertible bonds (CBs) comprises only models where the stock price and the interest rate are governed by pure-diffusion processes. This paper fills a gap by developing and implementing a two-factor model where both underlying factors follow jump-diffusion processes, and which also incorporates default risk. We derive the partial integro-differential equation satisfied by the CB price in our model, and solve it by a spectral method based on Chebyshev discretizations and Clenshaw–Curtis quadratures. The conversion, call, and put constraints give rise to a linear complementarity problem, which is solved by an operator-splitting (OS) method. Through numerical experiments, we investigate the effects that the various parameters have on the CB price. In particular, our numerical experiments show that jumps in the stock price have a significant impact on the CB price, while jumps in the interest rate tend to have a minor effect on the price. In general, the dynamics of the stock price have more impact in pricing the CB than the dynamics of the interest rate.

scholarly journals Pengaruh Suku Bunga, PER, dan PBV Terhadap Harga Saham Perusahaan Sub Sektor Konstruksi Bangunan

2021 ◽  
Vol 4 (2) ◽  
pp. 706-711
Author(s):  
Rosa Arbaningrum ◽  
Asep Muslihat
Keyword(s):  
Interest Rate ◽  
Stock Prices ◽  
Stock Price ◽  
Descriptive Analysis ◽  
Linear Regression Analysis ◽  
Multiple Linear Regression Analysis ◽  
Share Price ◽  
Result Show ◽  
The Interest Rate ◽  
Test Result

The study aims to determine how much influence of interest rate, PER, and PBV have on stock prices. The method used is descriptive verification with a quantitative approaches. Data were analyzed using multiple linear regression analysis. Based on the results of a descriptive analysis of the highest interest rate occurred in 2014-2015 while the lowest interest rate in the 2017. There are 5 building construction sub-sector companies that have PER industry average, while 4 other companies have PER above industry average. Furthermore, there are 4 companies that have the value of PBV below the industry average and 5 companies have PBV above the industry average. Then, there are 5 companies that have a share price above the industry average and 4 companies have the stock price below the industry average. Based on the result of verificative analysis that interest rate variable has no signification effect on stock price, while PER variable has no signification effect on stock price and PBV variable has signification effect on stock price. R square test result show that the interest rate, PER, and PBV has effect of 29,3% against the stock price so that remaining 71,7% is affected by other variables that are not researched. Keywords: Interest Rate; PER; PBV; Stock Price.  

scholarly journals The voice of Physics in finance: A glance on the theoretical application of heat equation to stock price diffusions

2021 ◽  
Vol 4 (1) ◽  
Author(s):  
Leonard Mushunje
Keyword(s):  
Brownian Motion ◽  
Heat Equation ◽  
Stock Prices ◽  
Stock Price ◽  
Price Volatility ◽  
Heat Diffusion ◽  
Motion Model ◽  
Asset Valuation ◽  
Brownian Motion Model ◽  
Theoretical Application

Stock price volatility is considered the main matter of concern within the investment grounds. However, the diffusivity of these prices should as well be considered. As such, proper modelling should be done for investors to stay healthy-informed. This paper suggest to model stock price diffusions using the heat equation from physics. We hypothetically state that, our model captures and model the diffusion bubbles of stock prices with a better precision of reality. We compared our model with the standard geometric Brownian motion model which is the wide commonly used stochastic differential equation in asset valuation. Interestingly, the models proved to agree as evidenced by a bijective relation between the volatility coefficients of the Brownian motion model and the diffusion coefficients of our heat diffusion model as well as the corresponding drift components. Consequently, a short proof for the martingale of our model is done which happen to hold. 

scholarly journals INTEREST RATE ADJUSTMENT AND STOCK MARKET – THE CASE STUDY OF CHINA

2021 ◽  
Author(s):  
Ning Zeng ◽  
◽  
Xixi Li ◽  
Keyword(s):  
Interest Rate ◽  
Stock Market ◽  
Stock Price ◽  
Price Index ◽  
Stock Index ◽  
Rate Adjustment ◽  
Stock Price Index ◽  
The Interest Rate ◽  
The Impact

This paper examines the impact of interest rate adjustment on the stock market in China. We collect the interest rate adjustment periods from April 21, 1991 to October 24, 2015 since the estab¬lishment of the stock market. Through an Error Correction model together with Granger causality, we investigate responses of the stock index to interest rate adjustment. Our findings suggest that there is existing a long-term reverse relationship between interest rate adjustment and stock index. The impact of interest rate adjustment on stock index returns could not be long-term disequilibria, which will be corrected in short-time. Also, the interest rate is the granger cause of the stock price index, while the stock price index is not the granger cause of interest rate.

OPTION PRICING FOR PROCESSES DRIVEN BY MIXED FRACTIONAL BROWNIAN MOTION WITH SUPERIMPOSED JUMPS

2015 ◽  
Vol 29 (4) ◽  
pp. 589-596 ◽  
Author(s):  
B.L.S. Prakasa Rao
Keyword(s):  
Brownian Motion ◽  
Fractional Brownian Motion ◽  
Stock Price ◽  
Option Price ◽  
Motion Model ◽  
Price Process ◽  
European Call Option ◽  
Mixed Fractional Brownian Motion ◽  
Special Cases ◽  
Brownian Motion Model

We propose a geometric mixed fractional Brownian motion model for the stock price process with possible jumps superimposed by an independent Poisson process. Option price of the European call option is computed for such a model. Some special cases are studied in detail.

scholarly journals The Influence of The Inflation Rate and The Interest Rate of Bank Indonesia Certificates on The Composite Stock Price Index With The Us Dollar Exchange Rate As A Moderating Variable on The Indonesia Stock Exchange

2020 ◽  
Vol 3 (3) ◽  
pp. 212
Author(s):  
Dwi Septiani
Keyword(s):  
Exchange Rate ◽  
Interest Rate ◽  
Stock Price ◽  
Price Index ◽  
Inflation Rate ◽  
Dollar Exchange Rate ◽  
The Us ◽  
Us Dollar ◽  
Stock Price Index ◽  
The Interest Rate

This study aims to determine how the influence of the inflation rate and the interest rate of Bank Indonesia Certificates (SBI) on the Composite Stock Price Index (IHSG) with the US dollar exchange rate as a moderating variable on the Indonesia Stock Exchange 2007-2016. The data of this research consists of inflation rate reports, Bank Indonesia Certificate interest rate reports, US dollar exchange rate reports and reports on the Composite Stock Price Index for 120 (one hundred and twenty) months, starting from 2007 to 2016. Methods The research used in this research is associative research with quantitative data analysis. Data calculation was performed by using multiple regression analysis of the relationship, t test, F test and the coefficient of determination R2. Meanwhile, to test the moderating variable using the interaction test. The inflation rate variable (X1) and the interest rate for Bank Indonesia Certificates (SBI) (X2) with the US dollar exchange rate (X3) as the moderating variable simultaneously have a positive and insignificant effect on the Composite Stock Price Index (IHSG) (Y) on the Stock Exchange. Indonesia 2007-2016. The coefficient of determination of 0.596065 means it is known that the influence of the inflation rate variable (X1) and the interest rate for Bank Indonesia Certificate (SBI) (X2) with the US dollar exchange rate (Z) as the moderating variable is 59.61% while the rest 40.39% is explained by other variables that are not explained and examined in this study. Keywords: Inflation Rate, Bank Indonesia Certificate Interest Rate, US Dollar Exchange Rate and Composite Stock Price Index

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