Optimal Strategies Analysis of Convertible Bonds Based on Option Game

In this paper,a zero-sum game of perfect information is constructed based on the option game theory to analyze the interaction between the optimal call strategy of the issuer and the optimal conversion strategy of the holders.Moreover,the critical determinants including coupon payment,dividend policy,call notice period requirement,hard and soft call constraints on the valuation and optimal strategies of convertible bonds are taken into account.The numerical results obtained by finite element method show that these determinants have significant affect on the optimal strategies of convertible bonds,which is important for the pricing and designing of convertible bond.