Arbitrage Pricing of Defaultable Game Options with Applications to Convertible Bonds

by Tomasz R. Bielecki of the Illinois Institute of Technology,
Stéphane Crépey of the Université d'Évry Val d'Essonne,
Monique Jeanblanc of the Université d'Évry Val d'Essonne, and
Marek Rutkowski of the University of New South Wales & Warsaw University of Technology

November 28, 2006

Abstract: In this paper we characterize arbitrage prices of defaultable game options with real-life features (default, dividends, etc.), e.g. convertible bonds, and we consider the decomposition of convertible bonds in an optional and a bond component.

Published in: Quantitative Finance, Vol. 8, No. 8., (December 2008), pp. 795-810.

Previously titled: Arbitrage Pricing of Convertible Securities with Credit Risk

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