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Rene Carmona (Princeton University)

Convertible Bonds and Swing Contracts as Dynkin Games: A Monte Carlo Approach

Abstract: In this talk, we review the special features of the indentures of convertible bonds and some energy swing contracts and we introduce Dynkin games of timing as natural mathematical models for the computations of the values of these contracts. After reviewing the theory of these games in discrete time we explain a regression-based Monte Carlo valuation algorithm and we demonstrate its performance on real data.