Signalling under intertemporal resolution of uncertainty: Distinguishing debt-with-warrants from similar offerings

This article extends existing static analyses of debt-with-warrants' ability to signal by considering the intertemporal resolution of uncertainty. Provided that managers seek to minimize residual risk while correctly signalling prospects, callable bonds-with-warrants can prove strictly superior to analogous offerings of pure debt or of debt-with-equity. Because our intertemporal structure allows bonds to be called while warrants remain outstanding, these complicated offerings can also be successfully discriminated from convertible bonds. Managers can further accentuate dissipation of residual risk by simultaneously issuing debt-with-warrants and buying down existing equity (through share repurchase or cash dividends).The authors express our appreciation to Charlie Jacklin for discussions concerning this material. Our thanks also go to an anonymous referee atRQFA who helped us to refine our final product.Much of the work for this paper was conducted while Professor Robbins was a Visiting Research Scholar at Stanford GSB.     

收益管理中可召回票数量的优化方法研究

可召回票是近年来航空收益管理研究的热点之一.文章在航空公司舱位优化分配的基础上,建立可召回票数 量最优控制模型,并给出了求解的方法.建立的数学模型不仅能与现有的收益管理系统结合,而且模型的算法有效可行,能为航空公司在可召回票的数量控制上提供有利的决策支持.     

国开行可赎回债券和可回售债券的定价探讨

可赎回债券可以分解成普通债券和债券看涨期权的组合,可回售债券可以分解成普通债券和债券看跌期权的组合.本文使用BDT模型对国家开发银行自2001年以来发行的可赎回债券和可回售债券定价,结果发现可赎回债券被高估,而可回售债券被低估.     

赎回权的价值与封闭式基金折价率研究——兼论“封转开”方案设计

本文比较了封闭式基金与对等的开放式基金之间的差异，认为缺少赎回权是封闭式基金产生折价的主要原因。在一个具有完全择时能力的封闭式基金投资者的假设条件下，本文推导并证实了赎回权价值上限和隐含折价率下限计算公式。基于赎回权，本文提出了“封转开”方案设计的一个新思路，希望对市场上正在热烈讨论的“封转开”问题有所启示。     

Effects of Callable Feature on Early Exercise Policy

Convertible bonds and American warrants commonly contain the provision of the callable feature which allows the issuer to buy back the derivative at a predetermined recall price. Upon recall, by virtue of the early exercise privilege embedded in an American style derivative, the holder may choose either to exercise his derivative or to sell it back to the issuer. Normally, there is a notice period requirement on the recall, that is, the decision of the holder to exercise or to receive the cash is made at the end of the notice period. Also, the period of recall provision may cover only part of option's life. In this article, we examine the effect of the callable feature (with the notice period requirement) on the early exercise policy of a callable American call option. The optimal calling policy for the issuer is explored where the value of the American option is minimized among all possible recall policies. Without the notice period requirement, the critical asset price boundary of the callable American call is identical to that of the American capped call. When the notice period requirementis imposed, the critical asset price (considered as a function of time to expiry τ) first increases with τ,reaches some maximum value, then decreases with τ. Several approaches of designing numerical algorithms for the valuation of the callable American option are also presented. This revised version was published online in November 2006 with corrections to the Cover Date.     

外汇结构性存款的价值分解与定价方法分析

本文主要根据金融工程的组合分解原理,对外汇结构性存款的基本价值构成和定价方法框架进行分析与探讨。首先,在考虑收益风险的基础上,对一般性的欧式外汇结构性存款的价值构成进行分析。然后,在上述基本要素的基础之上,分析具有可提前赎回或回售特征的外汇结构性存款的基本价值构成,并以解析解的形式对该类外汇结构性存款进行价值构成分解;最后,对该产品各个部分价值所采用的定价理论方法进行阐述分析。其中,该产品的附息债券部分运用普通蒙特卡罗模拟方法进行定价,而可提前赎回和可提前回售部分的价值拟运用改进的最小二乘蒙特卡罗模拟方法进行定价。     

Optimal Bond Refunding: A Practical Approach

Although there is substantial research on optimal bond refunding, an important real-life feature is missing from the existing literature: imperfect adjustment or 'stickiness' of bond yields to short term interest rate changes. Our model takes this behavior into account, and also has the ability to handle mean reverting interest rates. The results indicate that the former has a significant effect on the optimal refunding policy (especially for longer maturities), but the latter does not. By incorporating these features, our model will hopefully offer a fairly complete and easily implementable guide to managers with regard to the bond refunding decision.     

Callable bull/bear contracts,call auction sessions,and price manipulations: Evidence from Hong Kong

Call auction sessions are widely adopted to improve the price discovery process. The suspension of the closing call auction session (CAS) of the Hong Kong Stock Exchange (HKEx) in 2009 and the reintroduction of an enhanced CAS in 2016 provide us a unique experimental environment to assess the effectiveness of the two different CAS models in reducing market manipulation. In examining the probability of mandatory call events (MCEs) of callable bull/bear contracts (CBBCs), we find the enhanced CAS model being more effective in price manipulation reduction. We also find the enhanced CAS reducing price manipulation in the preopening auction session.     

Yield spreads,agency costs and the corporate bond call feature

This paper theoretically compares yields and optimal default policies for callable and non-callable corporate debt. It shows that, contrary to the conventional wisdom, it is possible for the yield spread (callable minus non-callable) to be negative. It also identifies the key determinants of the yield spread. Next, it shows that the optimal default trigger for non-callable debt is higher than the trigger for callable debt, resulting in additional default-related costs. Thus, the use of non-callable debt gives rise to an indirect agency cost of early default, which is the difference in total firm value with callable and non-callable debt. This agency cost provides a rationale for the existence of callable debt. By examining the determinants of the magnitude of this agency cost, the conditions that make callable debt more attractive (to the issuing firm) relative to non-callable debt are identified. This allows certain predictions to be made regarding the likelihood of a call feature in a corporate bond. The model's implications are supported by existing empirical studies.     

Valuation of callable accreting interest rate swaps: Least squares Monte-Carlo method under Hull-White interest rate model

Using the Hull-White interest rate model, this paper proposes a valuation method of callable accreting interest rate swap (CAIRS) and how it can be used for managing the risk of zero callable bonds (ZCBs). Firstly, CAIRS can be decomposed into accreting payer interest rate swaps and Bermudan options. Considering the financial valuation of both components, the former can be valued directly while the latter has no close-form due to its early exercise characteristics. Using the Least Squares Monte-Carlo method (LSM) proposed by Longstaff and Schwartz (2001), we find that the two options embedded in ZCB and CAIRS have the same exercise strategy since the terms of the swaps will include the bonds in practice. However, the cash flow of risk management in swaps and bonds can differ when considering the time value. Hence, CAIRS is not the best financial instrument for managing risks of ZCB under the current design.