BV829-CON Volatility Haircut in Convertible Debt Valuation


CE 1 | BV

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Session Description

In convertible debt valuation practice the notion of a "volatility haircut" is fairly common - an idea that the market pricing for convertible debt doesn't incorporate the full expected volatility for the underlying security. As such, an artificial cap on the volatility input is sometimes introduced to arrive at a value that is more aligned with market practice.   In this presentation, we investigate the application of a "volatility haircut" by comparing the market pricing on publicly traded and recently issued convertible securities, and model prices based on available market inputs. We consider practical modeling approaches that could allow practitioners to reconcile market and model prices.

Speaker Information

Marina Kagan, Director | PwC
Amir Alerasoul, Vice President | Valuation Research Corporation

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Disclaimer: The opinions expressed in this presentation are that of the presenter(s) and do not necessarily reflect the views and opinions of the American Society of Appraisers.

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