We only consider the convertibles outstanding during the period and with sufficient pricing information. As a result, we obtain a final sample of 164 convertible bonds and a total of 164 × 522 = 85,608 observations. None of the convertibles in this sample actually defaulted during the time window.
As of September 10, 2012, the sample represents a family of convertible bonds with a time to maturity ranging from 2 months to 36.6 years, and has an average remaining maturity of 4.35 years. The histogram of contracts on September 10, 2012 for various maturity classes is given in Figure 1.
Convertible bond prices observed in the market will be compared with theoretical prices under different volatility assumptions. The sample is segmented into two sets according to the time to maturity: a short-maturity class (0 ~ 8 years) and a long-maturity class (> 8 years). We first select a convertible bond from each group: a 7-year (or 5-year outstanding) contract and a 20-year (or 17-year outstanding) contract shown in Table 1.