RT Journal Article
SR Electronic
T1 The Effect of Default and Conversion Options on Bond Duration
JF The Journal of Fixed Income
FD Institutional Investor Journals
SP 26
OP 35
DO 10.3905/jfi.2016.25.3.026
VO 25
IS 3
A1 Sana Horchani
YR 2015
UL https://pm-research.com/content/25/3/26.abstract
AB This article examines the effect of default and conversion option on bond duration. Empirical evidence shows that default risk decreases bond duration, excluding the case of investment-grade bonds with a short-term maturity. Furthermore, controlling for default risk effect, the conversion option decreases bond duration for equity-like and mixed bonds. Finally, the joint effect of default and conversion risk decreases bond duration for all convertible bonds.TOPICS: Fixed income and structured finance, options