TY - JOUR T1 - Pricing Convertible Bonds Subject to Default Risk JF - The Journal of Derivatives SP - 75 LP - 87 DO - 10.3905/jod.2002.319197 VL - 10 IS - 2 AU - Mao-Wei Hung AU - Jr-Yan Wang Y1 - 2002/11/30 UR - https://pm-research.com/content/10/2/75.abstract N2 - Convertible bonds are commonplace securities, but valuing them properly is tricky. In addition to being exposed to interest rate risk like any bond in a stochastic interest rate environment, they contain both an option to convert them into shares of the issuing firm, and also exposure to the risk of default. In this article, Hung and Wang present a lattice technique that allows relatively straightforward valuation, even in the presence of these three sources of risk. After describing their technique in general, they put it to use to evaluate a convertible bond issued by Lucent. ER -