This course defines convertible bonds, warrants and structured securities such as equity-linked notes. The typical features and characteristics of a convertible bond or preferred stock are examined and benefits to issuers and investors are identified. The calculation and interpretation of a convertible's premium and parity are presented. Market factors affecting the value of a convertible are explored. Various convertible trading strategies such as convertibles/equity switches, asset swaps and convertible arbitrages are analyzed. Specialized excel-based computer software will be utilized to price and understand the factors affecting convertible pricing. The discussion then turns to warrants, describing the features and characteristics of a warrant and the differences between warrants and options. How a warrant's premium, parity and breakeven are calculated and interpreted follows. Excel-based computer software is used to explore how these securities react to changes in market conditions and how they can be arbitraged against related instruments. Equity-linked structures are then introduced including principal protected notes and preferred equity redemption cumulative stock
Objectives
By the end of the course, the participant will be able to:
- Describe the typical features and characteristics of a convertible bond or preferred stock and identify the benefits for issuers and investors
- Calculate and interpret convertible's premium and parity
- Understand factors affecting convertible pricing
- Describe the typical features and characteristics of a warrant
- Identify differences between warrants and options
- Calculate and interpret warrant's premium, parity and breakeven
- Use computer software to price and identify how warrants react to changes in market conditions
- Explain equity-linked notes
- Identify various ELN structures such as PERCS and GROIs
- Identify Bloomberg functions used by market practitioners
This course is designed for
- Equity derivatives salespersons
- Risk managers and trade support people who need to understand and analyze OTC products
