How do options add value? Evidence from the convertible bond market

Research output: Contribution to journalArticleAcademicpeer-review

Abstract

This paper studies the value relevance of the options market by focusing on convertible bond pricing. Pricing convertible bonds requires essentially the same set of information necessary to price options. Using a regression discontinuity design based on minimum stock price requirements for option listings, we find that the availability of stock options helps issuers attract more convertible bond buyers and reduces convertible issuers’ cost of financing. Our results highlight that the availability of individual stock options can add value to security issuers.
Original languageEnglish
JournalReview of Finance
DOIs
Publication statusPublished - 2022

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