November 19th, 2003, 2:40 pm
Thanks for your reply.In explicit scheme, in order to calculate U(i+1,k) U(i+1, k+1) U(i, k+1) U(i-1, k+1)My first problem is how to find U(i+1,k) because I need to put some upbounds. But I cannot just do: cv_price = conv_ratio* St(i) v(i) = max(cv_price, v(i))Sorry for stupid questions.================================================================================In TF: for CB for cash only convertible bond partFinal condition at expiration:U(S,T)=cnv.ratio*S for S>=B/cnv.ratio or U(S,T)=B elsewhereV(S,T)=0 for S>=B/cnv.ratio or v(S,T)=B elsewhereUpside constraints due to conversion:u>=cnv.ratio*sv=0 if u<=cnv.ratio*SUpside constrains due to callability:U<=max(Bcall, cnv*S)V=0 if u>=BcallDownside constraints due to putability:u>=Bputv=Bput if u<=Bput