Valtech Valuation Advisory has deployed a new version of convertible bond valuation system to power up its valuation support in convertible bonds / convertible notes and convertible securities. Issuers who are preparing for or have already issued convertible securities can consult us early to better plan for the coming financial report.

The most significant update of the new system is related to depth of disclosure and being “auditor friendly”. We fully understand the increasing disclosure requirements of auditors. This version upgrade aims to cater for auditors’ expectation on clear presentation of key assumptions and illustration how specific derivatives features have been considered in the financial model.

The updated version is built on binomial tree (or lattice model) on convertible securities. We have included input validation features and a powerful feature to output the whole binomial trees within a short period of time. The new version can now cater for complicated convertible securities with the following features:

  • Early redemption by issuer feature
  • Early redemption by holder feature
  • Call or early redemption only within a specified timeframe
  • The notice of redemption shall take priority against the notice of conversion
  • Consideration of dilution effect (if applicable)
  • Complete output of binomial trees with time steps

*The complete output of binomial tree is only applicable to most of the convertible securities that can be valued using binomial model without highly specialised features. Complete output of steps may not be possible for valuation using monte carlo simulation method.