Abstract
The article analyzes the main approaches to estimating the value of convertible bonds, considering the factors of the event time and investor behavior. In the process of project implementation, there is often a need to finance costs that will ultimately contribute to increased cash flow. For an investor, there is a risk that he may not receive coupon payments or bond denomination on a timely basis or may not receive them partially or at all. For this purpose, a convertible bond offers a mechanism for the acquisition of a portion of the authorized capital of a project company by exchanging a specified number of bonds for the definite number of shares in proportion to the conversion rate. Right, but not obligation, gives the investor the flexibility to make the right strategic decision: get passive coupon revenue or participate in corporate governance. Such a decision should be properly evaluated and mathematically justified as it depends on the level of profitability and risk of the investor.
Highlights
Financing of international business projects often occurs in several stages that are stretched over time, and this circumstance causes a constant search for new investors
Nowadays we have a wide range of valuation methods of convertible bonds
Each of them is linked to the factors, which are taken into consideration by implementing the mechanism of converse as well as circumstances, under which investor has right to change the definite number of bonds into the definite number of shares
Summary
Financing of international business projects often occurs in several stages that are stretched over time, and this circumstance causes a constant search for new investors. Debt fundraising requires new forms of investor incentive in order to ensure their interest throughout the life cycle and stimulate financial and managerial efforts to increase the value of the project Such a problem can be solved by issuing convertible bonds, which contain an option for investor participation in the share capital of the company. The purpose of research is to show the ways of convertible bonds valuation by implementing international business projects in order to attract investors. Dutch scientist Ian Giddy specifies the components of hybrids and identifies the most important: bonds; forward contracts; options He describes a group of factors that underlie the creation of a hybrid financial instrument: regulatory restrictions; the level of tax burden; transaction costs and R&D costs; market segmentation; restrictions imposed by internal contracts or orders of the firm. If several scenarios have the potential benefit, the investor will choose the scenario with the maximum amount (Table 1)
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Free) 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call
