@article{Coonjobeharry_Behera_Thakoor_2024, title={Numerical PDE-Based Pricing of Convertible Bonds Under Two-Factor Models}, volume={5}, url={https://ojs.wiserpub.com/index.php/CM/article/view/3343}, DOI={10.37256/cm.5120243343}, abstractNote={<p>Convertible bonds are popular financial instruments by which firms raise capital. Owing to the various features of such bonds, especially the early-exercise call, put, and conversion provisions, they can be valued by numerical techniques only. The price of a convertible bond is driven by both the underlying stock price and the interest rate, and these two factors are correlated. Under the partial differential equation framework, a two-dimensional convection-diffusion-reaction equation containing a mixed derivative must be solved. In this work, we employ an Alternating-Direction-Implicit method, namely the Craig-Sneyd scheme to solve the two-factor pricing equation. Comparison against the commonly employed Crank-Nicolson method shows the merit of the scheme. Besides, we analyze how the different contractual features of a convertible bond affect its price.</p>}, number={1}, journal={Contemporary Mathematics}, author={Coonjobeharry, Radha Krishn and Behera, Dhiren Kumar and Thakoor, Nawdha}, year={2024}, month={Jan.}, pages={93–104} }