Victor Gushchin has an MS in Mathematics and Applied Mathematics and a PhD in Economics from Moscow State University. He is currently employed as Manager of the Financial Model Validation and QA Front Office teams for Sophis Technology Ireland. In this post, he is also responsible for developing and validating pricing models for convertible bonds and providing assistance to hedge funds in this respect.Erwan Curien was educated in mathematics and physics (Ecole Polytechnique, France, 1998), specialising in finance and statistics (ENSAE, 2001). He is currently employed as the manager of the Quantitative Research team for Sophis Technology France. In this post, he is also responsible for developing models for convertible bonds. He has published several articles on convertible bonds and credit derivatives. Practical applicationsOwing to its relative simplicity and its ability to incorporate the main characteristics of convertibles that have limited market data, the Tsiveriotis and Fernandes framework is widely used by practitioners for pricing convertible bonds. In our research, we addressed the most important unanswered question regarding the Tsiveriotis and Fernandes framework; does the framework provide accurate and practical valuation consistent with the market? We conducted what we believe is the most extensive empirical research on the subject and found that using a moving-average credit spread results in a valuation that is consistent with the market. The existence of a continuous credit spread that can be used to achieve accurate pricing establishes solid practical grounds for the hedging strategy based on historical implied credit spread that is used by many hedge funds. The co-integration of historical volatility and credit spread described in the article makes it possible, in many cases, to price convertibles without complete market information. Practical advice and examples are provided. AbstractDespite a huge popularity of convertible bonds and a variety of different pricing models, very little empirical research on their valuation has been undertaken. This paper investigates the pricing performance of arguably the most popular among practitioners, the Tsiveriotis and Fernandes approach implemented within a trinomial-tree model with exogenous credit spread using daily market prices on the largest available historical database (B1500 CBs). We demonstrate that using a constant credit spread within that framework would lead to significant mispricing in average. By contrast, we present a practical approach for valuing convertible bonds with moving-average credit spread, which leads to acceptable results. We prove that historical volatility and implied credit spread are cointegrated for the majority of bonds in our sample. This allows us to model credit spread based on cointegrated relationship with volatility and extend our model to the cases with limited market information available. The mispricing is proven to be statistically insignificant in the researched convertible bonds.

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The paper examines the problem of optimization of the fatty acid composition of lipids in poultry meat, which is widely used in nutrition. The omega-6 content is significantly higher than the omega-3 content in the composition of poultry meat lipids, which is not optimal for assimilation and needs a correction. The possibility of turkey meat enrichment with linseed oil was investigated with the aim of ensuring the omega-6 to omega-3 ratio in the minced meat formulations, which provides for the nutritionally adequate balance not higher than 10 units. The paper also presents the results of the investigation of the fatty acids composition and fatty acid balance of the lipid fraction of minced meat as well as the changes due to thermal heating of meat formulations in the water medium with a temperature of 95±2 °C to a product core temperature of 70±1 °C. According to the data of the investigations, the omega-6 : omega-3 ratio in the minced meat formulations before thermal treatment was 6.5 to 7.7 units compared to the control (42 units); after thermal treatment, it was 6.5 to 8.0 units for the minced meat formulations, which included vegetable oils with linseed oil. The data on the fatty acid composition of the formulations correspond to the indicators of the fatty acid balance which was RL1…3=0.47-0.57 and RL1…6 = 0.32-0.37 units for enriched minced meat before thermal treatment and 0.48-0.57 and 0.31-0.38 units after thermal treatment, respectively. The results confirm the possibility to enrich minced meat formulations with linseed oil when producing meat balls, which can be extended to other types of products.