Title: Pricing Contingent Convertibles: A Derivatives Approach
Authors: De Spiegeleer, Jan ×
Schoutens, Wim #
Issue Date: Nov-2012
Publisher: Euromoney Institutional Investor PLC
Series Title: The Journal of Derivatives
Abstract: This article provides an in-depth analysis of the pricing and structuring of contingent convertibles (CoCos). These debt instruments convert into the equity of the issuing bank or suffer a write-down of their face value upon the appearance of a trigger event. This trigger mechanism provides an au- tomatic strengthening of the capital structure of the bank. In this paper the pricing of CoCos is handled using two different approaches. The first method has a credit derivatives background while the second approach tack- les the pricing and structuring of a CoCo as an equity derivatives problem. In both cases the valuation of a contingent convertible can be done through a closed form formula. Both approaches prove their applicability when it comes to quantify the risks embedded within the recently issued contingent convertible structures.
ISSN: 1074-1240
Publication status: accepted
KU Leuven publication type: IT
Appears in Collections:Non-KU Leuven Association publications
× corresponding author
# (joint) last author

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