Title: Steering a bank around a death spiral: Multiple Trigger CoCos
Authors: De Spiegeleer, Jan ×
Schoutens, Wim #
Issue Date: May-2012
Publisher: Wiley
Series Title: Wilmott Magazine vol:2012 issue:59 pages:62-69
Abstract: In this paper we start with the introduction of two pricing models to value contingent convertibles. One model (“rule of thumb”) has its roots in credit derivatives pricing while the second model implements an equity derivatives approach. From these models we then quantify the equity sensitivity and the negative gamma resulting from the design of a contingent convertible and illustrate the possible pitfalls of a death spiral on the share price. We conclude that moving away from one larger single CoCo issue towards more but smaller issues with accounting triggers spread across an extended range will alleviate the death spiral risk.
ISSN: 1540-6962
Publication status: published
KU Leuven publication type: AT
Appears in Collections:Statistics Section
× corresponding author
# (joint) last author

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