Bargains in the Corporate Convertible Bond Market
Bibliographic record
Abstract
Abstract The embedded option implicit in Treasury issues has recently attracted a lot of attention. Studies in the callable US Treasury bond market suggest that prices of callable bonds often imply negative values for the call option embedded in them. Although options embedded in Treasury issues have been the focus of a lot of research, options embedded in corporate bonds have not received as great attention. This is the first study which conducts a complete examination of the pricing behaviour of convertible bonds with respect to pricing conditions implied by the presence of the embedded option. Results indicate that convertible bonds are often underpriced to the extent that negative conversion option values are implied. Résumé L'option enchǎssée implicite dans les émissions du Trésor a récemment suscité beaucoup d'attention. Des études sur le marché des obligations remboursables à vue du Trésor américain suggèrent que les coǒts des obligations remboursables à vue sous‐entendent souvent des valeurs négatives pour l'option d'achat qui y est enchǎssée. Bien que les options enchǎssées dans les émissions du Trésor ont été le sujet central de plusieurs recherches, les options enchǎssées dans les obligations de sociétés n'ont pas reçu une aussi grande attention. Ceci est la première étude qui conduit un examen complet du comportement de la valorisation des obligations convertibles relativement aux conditions de valorisation sous‐entendues par la présence des options enchǎssées. Les résultats indiquent que les obligations convertibles sont souvent en vente à un prix inférieur à leurs vraies valeurs à tel point que des valeurs négatives d'option de conversion sont sous‐entendues.
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How this classification was reachedexpand
Full frame machine prediction
Teacher imitationNot calibrated prevalence, not ground truth. Human validation pending. The Gemma side is a direct model label for every work in the frame, read from the title-only record. The Codex side is a classifier learned from the 10,348 direct Codex labels and calibrated to design-weighted sample rates; fields without enough sample support carry no Codex call. Candidate is the union of the two sides; consensus is their intersection. These outputs are machine_predicted_unvalidated and are not human labels.
Distilled classifier scores by category (both heads)
| Category | Codex | Gemma |
|---|---|---|
| Metaresearch | 0.001 | 0.006 |
| Meta-epidemiology (narrow) | 0.000 | 0.000 |
| Meta-epidemiology (broad) | 0.001 | 0.000 |
| Bibliometrics | 0.000 | 0.001 |
| Science and technology studies | 0.001 | 0.002 |
| Scholarly communication | 0.003 | 0.003 |
| Open science | 0.001 | 0.001 |
| Research integrity | 0.002 | 0.002 |
| Insufficient payload (model declined to judge) | 0.015 | 0.001 |
Machine scores (provisional)
The two teacher heads of the student model, read on this work. A score orders the frame for review; it never asserts a category, and the validation status ships verbatim with every row.
Baseline scores from an immature model (maturity gate not passed, 7 training rounds). Scores rank; they never assert a category.
score_only:v0-immature-baseline · verbatim from the scoring run: score_only means the number may rank works, and no category label ships from itClassification
machine, unvalidatedMachine predicted; a candidate call from one source (direct Gemma or distilled Codex), not a consensus.
How this classification was reached, model by model and score by score, is at the end of the page under "How this classification was reached".