This 3-part module introduces and analyzes convertible instruments up to an intermediate level and outlines a process for valuing them by decomposing them into more basic building blocks. We focus principally on regular convertibles which permit the bondholder to convert his investment into common stock under certain circumstances, but we also touch upon alternative structures that either give the conversion option to the issuer or that alternatively provide for automatic conversion upon the occurrence of some specified event. We restrict ourselves in this module to relatively simple structures and leave for a more advanced module the second generation of convertible instruments such as zero coupons, contingent convertibles, and a variety of other alternatives that require complex knowledge of tax law well beyond the scope of this module. The last chapter before the quiz discusses accounting issues that are relevant to these instruments and some of the implications of issuing a convertible from a credit rating and regulatory perspective.
target audience:DX1 Bankers, risk managers, sales force, financial control and audit
prerequisite required:
– Bond fundamentals
– Equity-linked Note
prerequisite recommended:
– Accounting for Derivatives
– Basle 1 and Basle 2
Please click below pictures to explore the chapters:
