Convertible Bonds

This two-day course will help delegates understand all aspects of US convertibles and the market they trade in. An introduction will be given to the convertible structure, followed by a theoretical and practical explanation of how convertibles behave - case studies will be examined in this session. Following a discussion on the characteristics of the convertibles market (including the practicalities of how and where convertibles trade), two sessions will be held on valuation of convertibles using traditional approaches, describing the common theoretical models used, and a discussion on the latest advances in valuation modelling. Then some similar structures will be looked at - including mandatories, exchangeables and preferreds. Finally, some popular trading strategies will be examined and some miscellaneous areas of interest discussed.

Throughout the course, practical Excel-based sessions will be conducted to enhance and check learning. Commonly used Bloomberg pages will be studied and explained. PCs will be supplied to delegates.

By the end of this course, delegates will be able to:
+ Understand convertible structures, how they work, and how different market forces affect prices
+ Calculate and know how to use the common convertible metrics
+ Gain knowledge about how the US market works
+ Understand how convertible valuation models work
+ Gain insight into non-vanilla convertibles such as mandatories, exchangeables and preferreds
+ Appreciate how some common convertible trading strategies work
+ Understand how reverse convertibles, contingent convertibles and CB asset swaps work

Available for in-house delivery. Call +44 (0)1483 573150

Duration: Two days (9.00am to 5.00pm)
Location: Apex City of London Hotel – London, UK
Trainer: Simon Moore
Course fee: £1990 + VAT – Register online


Overview of Convertible Bonds

+ Convertible bonds explained
+ Market overview and observations
+ Types of convertible bonds
+ Common features: hard calls, soft calls and puts

Convertible Behaviour and Case Studies

+ Valuation metrics: parity, premium and bond floor/yield
+ How convertibles react to equity changes
+ How convertibles react to interest rate changes
+ How convertibles react to credit changes
+ Impact of dividends
+ Dilution
+ Why a convertible does not equal a bond plus an option
+ How to read a term sheet
+ How to read a prospectus
+ How to read the Bloomberg DES page
+ Case studies

Characteristics of the US Market

+ Issuers of convertibles
+ Investors in convertibles
+ Credit quality of issuers
+ Sectors of issuers
+ How convertibles trade
+ Market depth and bid/offer spreads

Valuation of Convertibles I

+ Holistic approach
+ Traditional equity-based model
+ Binomial trees
+ Ability to predict credit


Valuation of Convertibles II

+ Credit - the foundation of valuation
+ Different credit models
+ Stochastic interest rates - when are they worthwhile
+ Model greeks
+ How to use the Bloomberg OCVC page

Non-Vanilla Convertibles

+ Mandatories
+ Exchangeables
+ Preferred shares
+ Synthetics

Trading Strategies/Arbitrage

+ Gamma
+ Cheap puts
+ Volatility trading


+ Reverse convertibles
+ Contingent convertibles
+ Convertible asset swaps