Can Convertible bond be valued using a tree

CFA Level II Fixed Income
#1

Callable bond can be valued using a tree like a callable bond, but the tree changes based on the common stock price.

  • Is this statement wrong?
#2

I suppose so, but it’s a silly viewpoint.

The value is going to depend on interest rates and the stock value, so you need a tree in three dimensions: one for time, one for interest rates, one for stock price.

#3

Thank you magician

#4

You’re welcome.

#5

Magician, Can you recommend some good methods to retain the information? I seem to go wrong somewhere…