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A Trader’s Guide to Convertible Bonds - Trading


Objective: a 3-day comprehensive programme covering all aspects of CBs including description of vanilla, complex, and "branded" structures recognizing the nuances  of selling bond products from and equity desk vs. an equity product from a bond desk:

·      examines all aspects of structuring, pricing, hedging, and managing CBs including issuer/investor perspectives, call policies, and market idiosyncrasies.

·      an especially detailed review and analyses of bonds, and interest rate securities and derivatives required not only for the valuation of CBs but also for hedging bond and "swapped" positions with and without a liquid "underlying" bond.

·      explanation of valuing and managing the vanilla and complex options embedded in CBs including, warrants, hybrids, quanto's, as well as call/put and even fancier facilities.

·      includes exercises and workshops on actual and hypothetical CBs analysing considerations for structuring, valuation, position risk, and investor/issuer matters including not only at date of issue but also "how has it performed" assessment.

Audience:  intended for market professionals and focusing on end users (some understanding of markets and products helpful), such as:

·      Traders, sales, support,

·     Management, treasurers,

·      Risk Management

Table of Contents

1)       Introduction to CBs and structuring basics: CBs the “big picture”, Risk/Return Profile Management, Economic Need, Idiosyncrasies, CBs vs. Structuring

2)       The Basics: CB Markets, EuroMarkets, Domestic Markets, Market Size, Definitions by Example, Why are CB’s hard to Value?  “coupled” stochastic (uncertain) elements

3)       Common CB Structures and Policy Considerations: The Debt/Equity Spectrum (how to make it more like equity or debt), Branded CB Structures (PERCS, Callable Convertible Preferred Stocks, DECs, LYONs, TOPRs, YEELDs, ... ad infinitum), Complex CB Structures, Call policy, Taxation considerations, Investor’s perspective, Issuer’s perspective.

4)       Valuation of CBs - in 3 parts: a comprehensive examination of pricing and position risk of CBs with special attention to the bond component and hybrid implications - 

Part 1: Heavy emphasis on IR and Bond analyses from PV theory to pricing and risk managing IR products, as well as IR curve generation.

Part 2: Options analyses from basic considerations of modelling uncertain process and risk-neutral concepts to modern notions of contingent claims analyses, risk management, to volatility basics.

Part 3: Hybrids analyses for exchange of asset and currency protection aspects of CBs, and analyses of correlation related valuation and risk management considerations.

5)       Valuation Workshop 1: Horizon Analyses, Bond + Warrant example, Dilution, Embedded option Example (callable/putable), Early exercise considerations, Hybrid Value example, Position hedging Simulation.


6)       Valuation Workshop 2: Workshop: analyses of issuing/selling/structuring a real CB both on issue date as well as a year later to see "how its done".


7)      Valuation Workshop 3 and 4: detailed examination of directional and arbitrate considerations in current CB issues.



871 Pages of comprehensive and extensively illustrated Handout Notes (see samples here)

Plus copies of relevant TG2 Books/e-Books

Note: Seminars can be tailored to your trading, risk, client, and systems needs.  Submit your needs, and/or "cut/paste" from other Seminars (see entire "standard" list HERE)

    Get a Syllabus in more detail

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Last modified: July 25, 2011