Re: [Quantlib-users] Convertible Bonds

[DU V. DE V. F. G. P. <fra...@ca...>]

Hi John,

I haven't read neither Ayache, Forsyth, and Vetzal nor Lucy Li's =
master's thesis, however the fact that we use a different numerical =
method should not worry you. What really matters is the stochastic =
process used (aka: model). In the example we use a Black Scholes Merton =
Process.=20
Hope this help,
Fran=E7ois

-----Original Message-----
From: qua...@li... =
[mailto:qua...@li...] On Behalf Of John =
Maiden
Sent: mercoled=EC 18 aprile 2007 23.46
To: qua...@li...
Subject: [Quantlib-users] Convertible Bonds

I've been playing with the Convertible Bond class, and have a question =
about its
implementation. This is probably due more to my lack of knowledge of the =
finance
than anything else.

The convertible bond model in ConvertibleBonds.cpp says it uses the
Tsiveriotis-Fernandes method, but the implementations of the model (from =
what
I've read in Ayache, Forsyth, and Vetzal, and Lucy Li's master's thesis =
(see
Wikipedia on Convertible bonds for the link)) all use a grid of stock =
prices and
times to determine the PDEs. The bond pricing engine in QuantLib seems =
to use
binomial trees to determine the price. Can anyone explain the =
discrepancy?


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