• 제목/요약/키워드: Contingent Convertible Bond

검색결과 3건 처리시간 0.02초

자본비율의 확률과정을 통한 조건부자본증권 가격결정론 (Pricing Model for Contingent Convertible Bond Using Stochastic Process of Equity Ratio)

  • 표수진;김태구
    • 대한산업공학회지
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    • 제43권1호
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    • pp.30-38
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    • 2017
  • Contingent convertible (Coco) bonds have been issued in 2009 after financial crisis for improvement of capital structure in international banks. With more focuses on coco bonds in financial market, academic fields have paid attention to the instrument for optimal structure for issuers and rational pricing methodologies. However, there is a crucial discrepancy in prevailing pricing model and their target subjects. Though most of the coco bonds have been issued based on accounting triggers, many of existing models are based on market prices and therefore exhibit limitations in practical use. In this paper, a more practical pricing method for accounting triggered coco bonds is proposed using stochastic equity ratio process. Empirical results tested on coco bond issued by JB financial group supported the proposed approach with favorable performance in tracking actual market prices.

Is Bail-in Debt Bail-inable?

  • HWANG, SUNJOO
    • KDI Journal of Economic Policy
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    • 제41권4호
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    • pp.1-44
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    • 2019
  • The contingent convertible bond (or CoCo) is designed as a bail-in tool, which is written down or converted to equity if the issuing bank is seriously troubled and thus its trigger is activated. The trigger could either be rule-based or discretion-based. I show theoretically that the bail-in is less implementable and that the associated bail-in risk is lower if the trigger is discretion-based, as governments face greater political pressure from the act of letting creditors take losses. The political pressure is greater because governments have the sole authority to activate the trigger and hence can be accused of having 'blood on their hands'. Furthermore, the pressures could be augmented by investors' self-fulfilling expectations with regard to government bailouts. I support this theoretic prediction with empirical evidence showing that the bail-in risk premiums on CoCos with discretion-based triggers are on average 1.13 to 2.91%p lower than CoCos with rule-based triggers.