Ngoc Lan Chi (Emma) Nguyen is currently in her third year of the Bachelor of Mathematics and Finance (Dean’s scholar) at the University of Wollongong. Her interests are subjects related to the pricing of financial derivatives and stochastic modeling, though she is also keen on exploring ideas and tools from a broad range of areas and being exposed to as many different fields as possible. She also looks forward to starting an honours project in financial mathematics in Spring 2019 and wishes to pursue a Mathematics-related profession that aims at creating a positive impact on the world.
Emma’s interests aside from studying include cooking and exploring international cuisines.
Laplace Transform Approach to Pricing Convertible Bonds
A convertible bond (CB) is a type of hybrid financial security that can be converted into a predetermined amount of the underlying company’s equity at or before a certain time (known as maturity) during the bond’s life, usually at the discretion of the bondholder. Various theoretical frameworks for valuing CBs have been formulated to price this financial security. However, due to their hybrid nature, the valuation of CBs can be complicated.
The aim of this project is to understand various methods used to price CBs and to derive a semi-analytical pricing formula using the Laplace transform technique, which will then be compared with the homotopy analysis method.