Contingent convertible (CoCo) notes : structure and pricing
著者
書誌事項
Contingent convertible (CoCo) notes : structure and pricing
（Euromoney books）
Euromoney Institutional Invester PLC, c2011
- :pbk.
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注記
Includes bibliographical references
内容説明・目次
内容説明
Contingent convertible notes (CoCo) made a very modest entry into the financial landscape in November 2009, when LLoyds TSB offered the holders of some of its hybrid debt the possibility to swap these holdings into a new bond with CoCo-features. A CoCo stands for a bond that will be converted into equity as soon as the bank gets into a life threatening situation. As soon as the solvency of the bank drops below acceptable standards, the bonds are converted into equity. This creates a dilution for the existing shareholders, but the solvency of the bank is improved under circumstances in which it would be typically difficult, if not impossible, to go to the capital markets directly. Some regulators continued on the route of Lloyds TSB. They now advocate the use of these bonds as soon as a bank represents too much systemic risk for the banking system. Some banks are already engineering new CoCo-note types or consider paying out CoCo-bonuses. For regulators, issuing banks, rating agencies, investors and trading desks around the globe. This makes this book a must read for everybody who wants to understand this asset class.
目次
Part 1: CoCo note structure 1 Introduction Definition Possible trigger Lloyds and Rabo: some pioneering work Risk profile Downside risk Limited upside potential Maturity unknown Are CoCos too exotic? Auto-callable Payoff Example Risk profile Are CoCos convertible bonds? 2 Capital structure of a bank: a primer Components Overview Assets Liabilities Tier 1 and Tier 2 How hybrid are CoCos? CoCo note case study Driving without CoCos Replacing debt with CoCos Does size matter? A lesson from the past Quality of the capital structure Basel Committee Basel I Basel II Basel III Going and gone concern 3 CoCo note history Rules, rules and more rules Fortress Europe and the US Central clearing counterparties Living wills Need for more regulatory capital Previous century's solutions Contingent capital in the insurance industry 4 Anatomy of a CoCo Constructing a bank basket Funded and unfunded contingent capital Funded Unfunded Contingent event Conversion in shares Debt write-down Conversion amount Trigger event Market-based trigger Accounting trigger Multi-variate trigger Regulatory trigger Conversion price Regulatory constraints CoCo note variations Write-down/write-up CoCo bonus CoCoCo Sovereign contingent capital Bail-in bonds The Anglo Irish case Fast track debt restructuring Lehman as a case study Basel Committee on bail-in capital Rabobank: Basel III innovator Tier 1 ratios of the bank basket 5 Pro and contra Advantages Explicit guarantees Less systemic risk Disadvantages Dilution of existing shareholders A trigger could create more triggers Bond investors No cash injection Topics for debate More stability Trigger Regulatory classification Part 2 Cracking CoCos: pricing and risk 6 Pricing a CoCo: introduction 7 Pricing a CoCo: credit approaches Introduction Looking at the balance sheet Reduced form model Credit spreads Default intensity Credit triangle Extension to CoCos Application on the Lloyds' ECNs - I Calculating the CoCo spread CoCo rule of thumb Example Application on the Lloyds' ECNs Application on the Credit Suisse BCN 8 Pricing a CoCo: equity derivative approaches Barrier options: introduction Introduction Definitions Barrier arithmetic Barrier options: pricing Black and Scholes formula Down-and-in call and put Pricing binary barrier options Pricing CoCos: derivatives framework Zero coupon CoCo Adding coupons to the CoCo model Modelling a market trigger Modelling accounting triggers 9 Dynamics Introduction Equity sensitivity (D) 10 CoCos in the market Introduction Rating Agencies Bond Indices Issuers Investors Retail investors Insurance companies Hedge funds Investment funds Regulators Bank for International Settlements (BIS) Financial Stability Board (FSB) United States United Kingdom 1 Switzerland Bibliography
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