Correlation with interest rates
Consider the impact of rise in interest rate
The future share price is expected to be higher because of higher risk neutralized drift rate.
Due to negative correlation between interest rate and share price (say, the S&P 500-stock index has a correlation of about minus 0.5), the share price drops first.
Negative correlations should lower CB value;
positive correlations should make it worth more.
Typical CBs may have price differences in the range
of 15-20% when correlations move from 1.0 to –1.0.