To make a profit, most individual investors and fund managers are forced to take a view on the direction of the price of something. The traditional investment strategy is to study all the aspects of the market place and decide on the value of the instrument under study. If the instrument is cheap, you buy, and if it is expensive, you sell. The traditional view taken is looking at only one dimension of a price sequence - the direction. Options can allow investors to completely ignore the direction of the price and to concentrate on the second dimension - the volatility of the price. It is...

The Convertible Bonds (CB) market is growing all the time. To date, over one trillion dollars worth of CBs are in circulation. Corporations are finding this source of fund-raising more and more attractive. And for different reasons, the buyers are finding CBs increasingly attractive investment vehicles.

There are few works on the subject of pricing convertible bonds. Most books discussing derivative products cover all details of pricing futures and options in minute detail. Convertible bonds and warrants are usually mentioned as an after thought in the latter chapters. This is...