Convertible bonds can be difficult to value, given that they incorporate elements of both debt and equity. Therefore, there have been many studies and models on the valuation of convertible bonds.
This thesis deals with the valuation of domestic convertible bonds by using of Ayache-Forsyth-Vetzal model(2003). This model values convertible bonds with credit risk and includes the effect of the stock price after the company`s default.
In order to value thirteen domestic convertible bonds` price, this thesis compares the price of Ayache-Forsyth-Vetzal model which considers credit risk with the price of Ayache-Forsyth-Vetzal model which does not consider credit risk and the price of Tsiveriotis-Fernandes model(1998).
In conclusion, Ayache-Forsyth-Vetzal model which considers credit risk shows more reasonable prices of the thirteen domestic convertible bonds than other models.
