Journal of Financial Intermediation Vol. 58 2024
Intermediary frictions and convertible bond pricing
open access
Abstract
Buy-and-hedge intermediaries are important investors in the convertible bond market as they intermediate between firms that require capital quickly and investors requiring time to assess the security. Their strategy requires them to manage the trade-offs involved with the costs and benefits of hedging. We find that prices of convertible securities reflect the costs that intermediaries incur when managing their positions. Especially cross-sectional and within-bond variation of intermediaries’ loan costs helps explain variation in convertible bond underpricing.
- DOI
- 10.1016/j.jfi.2024.101085
- Volume
- 58
- Pages
- 101085
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref