Convertible price sensitivities

FIGURE 9.19 Convertible price sensitivity - Conversion premium. 

The second parameter that affects convertible value is the volatility. In fact, the volatility of the underlying asset is the main element that moves the value of the embedded option, in which pricing models are very sensitive from this parameter. Note that convertible price rises as the volatility increases. The chart shown in Figure 9.11 defines the value of the convertible bond with the volatilities of 25%, 35% and 45%. 

Eneigy price sensitivity is shown by the feet that when converted to eneigy costs, the expenditures for dectricity and fossil fuels correspond to 10-20 percent of the value added. 

Direct and indirect competition formats, illustrated in Figure 1, are widely used for both qualitative and quantitative immunoassays. Direct competition immunoassays employ wells, tubes, beads, or membranes (supports) on to which antibodies have been coated and in which proteins such as bovine semm albumin, fish gelatin, or powdered milk have blocked nonspecific binding sites. Solutions containing analyte (test solution) and an analyte-enzyme conjugate are added, and the analyte and antibody are allowed to compete for the antibody binding sites. The system is washed, and enzyme substrates that are converted to a chromophore or fluorophore by the enzyme-tracer complex are added. Subsequent color or fluorescence development is inversely proportionate to the analyte concentration in the test solution. For this assay format, the proper orientation of the coated antibody is important, and anti-host IgG or protein A or protein G has been utilized to orient the antibody. Immunoassays developed for commercial purposes generally employ direct competition formats because of their simplicity and short assay times. The price for simplicity and short assay time is more complex development needed for a satisfactory incorporation of the label into the antibody or analyte without loss of sensitivity. 

Sensitivity analyses are performed to evaluate the effect of changes in cost factor values on H2 production and PV electricity prices. The cost factors for H2 production are PV electricity electrolysers electrolyser operating capacity factor electrolyser efficiency (in terms of converting electricity energy input into H2 energy output) electrolyser O M expense and the discount rate. The cost factors for PV electricity... 

A plant operating according to the Hamburg University pyrolysis process was built at Ebenhausen, with a capacity of 5000 tonnes per year. The feasibility of converting poly-oleflns by pyrolysis was successfully demonstrated, with yields from PE/PP mixtures of typically 51% (m/m) gas, 42% (m/m) liquids and the balance unaccounted for. However, the gas to liquids ratio is very sensitive to pyrolysis temperature. Since gas and oil are the major pyrolysis products, economic viability crucially depends on the price of crude oil. Under present conditions, profitability and economic viability are unsatisfactory at this small scale of operation. 

The embedded option component in convertible bonds makes the valuation sensitive from three main parameters share price, volatility and interest rate. These parameters affect the value of a convertible bond for both situations ... 

Consider also that the relationship between convertible and share price depends on the degree of the convexity. In fact, if the security has high convexity, its sensitivity is high to the movements of the share price. While in falling share prices, the convertible bond will suffer less. 

Moreover, the volatility input has a different effect depending on if the option is in or out of the money. In fact, the value of the convertible bond is more sensitive to changes in volatility when the option is in the money (price of the tmderlying asset... 

The most important Greek for convertible bond valuation is the delta. Delta measures the sensitivity of the option price to changes in the price of the underlying share price as follows (Equation 9.19) ... 

In convertible bonds, delta indicates the sensitivity between the convertible bond price and parity. It is given by Equation (9.21) ... 

Conversely, at the lowest node, the hedge ratio is 0 because the option is out of money or 0. This means that in the first case the bond trade like the equity, while in the second case like a conventional bond. Therefore when the share price increases the delta approaches unity, implying that the option is deeply in the money. In contrast, when the share price is low relative to the conversion price, the sensitivity of the convertible and therefore of the embedded option is low. 

The convertible bond will be more sensitive with the change of volatility when the option is at the money, or the share price is closed to the conversion price. 

Furthermore generating costs with CIRENE reactors, as with other heavy water converters, are not very sensitive to price... 

Total return investment Most convertibles are issued as total return instruments, with the investor considering both the bond yield and the conversion premium on the equity. They will continue to trade like this unless the equity moves strongly either up or down. As a total return investment, the bond will exhibit roughly symmetrical conversion premiums. Its price is sensitive to both movements in the price of the underlying equity and market views on the credit outlook of the company. If the share price rises, the conversion option value increases as the conversion premium decreases, although at a slower rate compared to the equity itself. The reverse occurs if the share price falls, but the bond has downside protection, so as it approaches its bond floor, it outperforms the share and becomes less sensitive to movements in the share price. 

For convertible bonds, delta is defined in terms of the sensitivity of the bonds price to changes in its parity. The parity is given from the value of the underlying equity price. The value of this delta can be gauged from FIGURE 13.9, which illustrates parity and bond floor. The delta is seen from the relationship of the parity and note price. 

---