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Description:
Andreas J. Grau Peter A. Forsyth Kenneth R. Vetzal
School of Computer Science
University of Waterloo, Canada

Abstract
In practice, convertible bonds can often be called only if notice is given to the olders. Most methods for valuing convertible bonds assume that the bond is continuously callable. In this paper, we develop an accurate PDE method for valuing convertible bonds with a finite notice period. Example computations are presented which illustrate the effect of varying notice periods. The results are compared with a recently published approximation method.