Hello, Anyone know the difference between two terminologies? Why busted convertible has a higher hedge ratio than non-busted convertible or regular convertible bond, assumed from the text book that the underlying hedging instruments for the former are shorting overvalued call option and long out-of-the-money call option and the latter using the shorting call options and stocks. I assumed Delta for the busted convertible will be smaller than non-busted convertible. Any idea?Thanks.
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