Download or read book The Risk Management of Contingent Convertible CoCo Bonds written by Jan De Spiegeleer and published by Springer. This book was released on 2018-11-02 with total page 106 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book provides an overview of the risk components of CoCo bonds. CoCos are hybrid financial instruments that convert into equity or suffer a write-down of the face value upon the appearance of a trigger event. The loss-absorption mechanism is automatically enforced either via the breaching of a particular accounting ratio, typically in terms of the Common Equity Tier 1 (CET1) ratio, or via a regulatory trigger. CoCos are non-standardised instruments with different loss-absorption and trigger mechanisms. They might also contain additional features such as the cancellation of coupon payments. Different pricing models are discussed in detail. These models use market data such as share prices, CDS levels and implied volatility in order to calculate the theoretical price of a CoCo bond and its sensitivities, providing the investor with insides to hedge from adverse changes in the market conditions. The audience are professionals as well as academics who want to learn how to risk manage CoCo bonds using cutting edge techniques as well as all the risk involved in CoCo bonds.

Download or read book Contingent Convertible Bonds Corporate Hybrid Securities and Preferred Shares written by Marcin Liberadzki and published by Springer. This book was released on 2019-06-17 with total page 229 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book is a comprehensive guide to the new generation of hybrid securities: subordinated and perpetual bonds with deferrable coupon first issued around 2003, and the youngest member of the hybrids family named CoCos (contingent convertibles) being a product of Basel III or European Union CRD IV regime (2014). Contingent capital constitutes a contractual recapitalization mechanism for troubled financial institutions. An increasing number of European banks have issued CoCo bonds in order to bolster their capital ratios. Following the EU pattern, CoCos issues have become increasingly popular within banks in Asia and the Pacific. The EU regulatory treatment of the contingent convertibles issued by banks and insurers together with bank bail-in instruments is at the forefront of the book. Furthermore, the book provides an overview of hybrids pricing and risk assessment approach and covers the non-voting preferred stocks as another hybrids class.

Download or read book Contingent Convertibles Cocos A Potent Instrument For Financial Reform written by George M Von Furstenberg and published by World Scientific. This book was released on 2014-08-08 with total page 287 pages. Available in PDF, EPUB and Kindle. Book excerpt: Contingent Convertibles (CoCos) represent debt that is subject to being converted automatically into common equity under pre-specified terms of conversion if the chosen regulatory capital ratio falls to a level triggering conversion. CoCos are that subspecies of contingent capital that references regulatory (Basel III) concepts in its triggers. From 2014, trigger points are set by common equity (Common Equity Tier 1 [CET1]) in percent of risk-weighted assets [RWA] or of more complicated measures of total exposure to a variety of risks, particularly credit risk. This is the first comprehensive book on CoCos, an innovative instrument that has attracted growing attention since it was first issued in 2009.The book is mostly concerned with going-concern ‘recovery-’ rather than ‘resolution-’ CoCos, because avoiding failure and costly disruption of financial networks without government financing is the first order of business. CoCos hold a high promise of providing fully loss-absorbing equity capital when it is most needed and least available to financial institutions. Yet, having grown out of the 2007-2009 financial crisis, they are still an ‘infant’ reform instrument in many respects. Few of the instrument's design features (or even the rating, regulatory, and tax treatments) are entirely settled. This book seeks to move the discussion toward, and then past, the main decision points so that CoCos can prove their value for contingency planning and self-insurance all over the world. It is intended to increase the ability of issuers and investors to analyze and understand the different kinds of CoCos.

Download or read book Achieving Financial Stability Challenges To Prudential Regulation written by Kaufman George G and published by World Scientific. This book was released on 2017-09-22 with total page 384 pages. Available in PDF, EPUB and Kindle. Book excerpt: The Great Financial Crisis of 2007–2010 exposed the existence of significant imperfections in the financial regulatory framework that encouraged excessive risk-taking and increased system vulnerabilities. The resulting high cost of the crisis in terms of lost aggregate income and wealth, and increased unemployment has reinforced the need to improve financial stability within and across countries via changes in traditional microprudential regulation, as well as the introduction of new macroprudential regulations. Amongst the questions raised are: What are the challenges to prudential regulation? How has the regulatory environment changed in recent years? How do the reforms interplay with market discipline, risk-taking incentives and risk management arrangements?Does the new regulatory framework allow for the introduction of financial innovation, and the associated benefits, without increasing disruptive financial risk? Contents: PrefaceAcknowledgmentsAbout the EditorsAbout the ContributorsSpecial Addresses: Challenges for Future Monetary Policy Frameworks: A European Perspective (Vítor Constâncio)Income Inequality: The Battlefield Casualty of Post-Crisis Financial Policy (Karen Shaw Petrou)A Practical Case for Rules-Based Macroprudential Policy (Adam S Posen)Financial Regulation: The Evolving Macro- and Microprudential Landscape: Evolving Micro- and Macroprudential Regulations in the United States: A Primer (Diana Hancock)The Regulatory Response to the Sovereign-Bank Nexus (Luc Laeven)Japan's Regulatory Responses to Banking Crisis (Masami Imai)The Costs and Benefits of Bank Capital Requirements (Gianni De Nicolò)Capital Regulation: Capital Regulation: How Much Capital is Needed? (Mark Carey)CoCos: A Promising Idea Poorly Executed (Richard J Herring)Capital Regulation: Lessons from a Macroeconomic Model (Caterina Mendicino, Kalin Nikolov and Dominik Supera)Liquidity Regulation: How Should Bank Liquidity be Regulated? (Franklin Allen and Douglas Gale)How Do We Figure Out Optimal Liquidity Regulation? (Douglas W Diamond and Anil K Kashyap) The Interplay Between Liquidity Regulation, Monetary Policy Implementation and Financial Stability(Todd Keister)Liquidity and Capital: Substitutes or Complements? (Marie Hoerova)Market Infrastructures, Central Clearing and Collateral Management: An Incentive Theory of Counterparty Risk, Margins, and CCP Design (Florian Heider)Monitoring CCP Exposure, In Real Time If Needed (Albert J Menkveld)Regulation and Financial Innovation: Innovation & Regulation: Some Preliminary Observations (Michael S Barr)Financial Innovation and Regulation (Thorsten Beck)Thoughts About Financial Innovation (Josh Lerner and Peter Tufano)How Technological Innovation Will Reshape Financial Regulation (Carmelo Salleo)Bail-in Versus Bail-Outs: Incentives and Financial Stability: Bail-in-Able Debt and Fragility (Russell Cooper)Government Guarantees to Financial Institutions: Banks' Incentives and Fiscal Sustainability (Agnese Leonello)The Unconvertible CoCo Bonds (Paul Glasserman and Enrico Perotti)Where to From Here?: The Macroprudential Toolkit (Richard Berner)The Great Financial Crisis and Its Aftermath: A

Download or read book The Handbook of Hybrid Securities written by Jan De Spiegeleer and published by John Wiley & Sons. This book was released on 2014-05-19 with total page 421 pages. Available in PDF, EPUB and Kindle. Book excerpt: Introducing a revolutionary new quantitative approach to hybrid securities valuation and risk management To an equity trader they are shares. For the trader at the fixed income desk, they are bonds (after all, they pay coupons, so what's the problem?). They are hybrid securities. Neither equity nor debt, they possess characteristics of both, and carry unique risks that cannot be ignored, but are often woefully misunderstood. The first and only book of its kind, The Handbook of Hybrid Securities dispels the many myths and misconceptions about hybrid securities and arms you with a quantitative, practical approach to dealing with them from a valuation and risk management point of view. Describes a unique, quantitative approach to hybrid valuation and risk management that uses new structural and multi-factor models Provides strategies for the full range of hybrid asset classes, including convertible bonds, preferreds, trust preferreds, contingent convertibles, bonds labeled "additional Tier 1," and more Offers an expert review of current regulatory climate regarding hybrids, globally, and explores likely political developments and their potential impact on the hybrid market The most up-to-date, in-depth book on the subject, this is a valuable working resource for traders, analysts and risk managers, and a indispensable reference for regulators

Download or read book Hybrid Securities written by Kamil Liberadzki and published by Springer. This book was released on 2016-04-08 with total page 228 pages. Available in PDF, EPUB and Kindle. Book excerpt: Hybrid capital securities or 'hybrids' offer various benefits. They offer flexibility equity without shareholder dilution, provide protection to senior creditors, are a stable source of long-term funding for healthy companies, and help insurers and banks meet regulatory and rating agency capital requirements. Risks and features of hybrid securities are expressed in the credit spread of some relatively new financial instruments, but no structural fundamentals exist for to price hybrids precisely. This book proposes a model for the pricing of hybrids. It begins by explaining the concept of hybrids as well as their equity- and debt-like characteristics. Different types of hybrids are presented, including preference shares, convertible bonds, contingent convertibles (CoCos) and bail-in bonds. The authors then present analysis of regulatory regimes' impact on hybrids. They discuss the types of hybrid bonds that are contemplated in the Capital Requirements Regulation (CRR) and Banking Union mechanism. They then present an in-depth examination of hybrids pricing and risk assessment techniques. The book provides a comprehensive analysis from mathematical, legal and financial perspectives in order to look at relatively new financial instruments and address problems with the pricing models of hybrids which are as yet unsolved.

Download or read book Handbook of Basel III Capital written by Juan Ramirez and published by John Wiley & Sons. This book was released on 2017-02-21 with total page 563 pages. Available in PDF, EPUB and Kindle. Book excerpt: A deeper examination of Basel III for more effective capital enhancement The Handbook of Basel III Capital – Enhancing Bank Capital in Practice delves deep into the principles underpinning the capital dimension of Basel III to provide a more advanced understanding of real-world implementation. Going beyond the simple overview or model, this book merges theory with practice to help practitioners work more effectively within the regulatory framework, and utilise the complex rules to more effectively allocate and enhance capital. A European perspective covers the CRD IV directive and associated guidance, but practitioners across all jurisdictions will find value in the strategic approach to decisions surrounding business lines and assets; an emphasis on analysis urges banks to shed unattractive positions and channel capital toward opportunities that actually fit their risk and return profile. Real-world cases demonstrate successful capital initiatives as models for implementation, and in-depth guidance on Basel III rules equips practitioners to more effectively utilise this complex regulatory treatment. The specifics of Basel III implementation vary, but the underlying principles are effective around the world. This book expands upon existing guidance to provide a deeper working knowledge of Basel III utility, and the insight to use it effectively. Improve asset quality and risk and return profiles Adopt a strategic approach to capital allocation Compare Basel III implementation varies across jurisdictions Examine successful capital enhancement initiatives from around the world There is a popular misconception about Basel III being extremely conservative and a deterrent to investors seeking attractive returns. In reality, Basel III presents both the opportunity and a framework for banks to improve their assets and enhance overall capital – the key factor is a true, comprehensive understanding of the regulatory mechanisms. The Handbook of Basel III Capital – Enhancing Bank Capital in Practice provides advanced guidance for advanced practitioners, and real-world implementation insight.

Download or read book Capital Adequacy Beyond Basel written by Hal S. Scott and published by Oxford University Press. This book was released on 2005 with total page 355 pages. Available in PDF, EPUB and Kindle. Book excerpt: The research contained in this book covers some key issues at stake in the capital requirements for insurance and securities firms. Contributors analyse the use of subordinated debt, internal models, and rating agencies in addition to examining the effect on capital of reinsurance and similar instruments.

Download or read book Law and Finance after the Financial Crisis written by Abdul Karim Aldohni and published by Taylor & Francis. This book was released on 2016-12-19 with total page 146 pages. Available in PDF, EPUB and Kindle. Book excerpt: The 2008 financial crisis has become one of the defining features of the twenty first century’s first decade. The series of events which unfolded in the aftermath of the crisis has exposed major structural flaws in many of the financial systems around the globe, triggering a global call for legal and regulatory reforms to address the problems that have been uncovered. This book deals with a neglected angle of the 2008 financial crisis looking in-depth at the implicit effects of the 2008 crisis on the UK financial market. The book considers new trends in finance which have emerged since the crisis as well as the challenges faced by some older practices in the UK financial markets. After providing a reflective account of the history of law and creditors in the UK the book investigates the proliferation of certain forms of financing that have recently become very visible parts of the UK financial market’s structure, such as high cost short term lending and peer to peer lending. It provides legal and economic accounts of these forms of alternative lending, charting their developments, current status and critically assesses their impact on the UK financial market. Also examined are the ongoing funding difficulties faced by Small and Medium Enterprises (SMEs) and the suitability of the UK current legal framework to support these institutions. The book goes on to look at the viability and safety of some other post crisis trends such as banks use of Contingent Convertible Bonds (CoCos) to improve their resilience.

Download or read book The Squam Lake Report written by Kenneth R. French and published by Princeton University Press. This book was released on 2010-05-25 with total page 182 pages. Available in PDF, EPUB and Kindle. Book excerpt: A nonpartisan plan of action for fixing the global economy from fifteen of the world's leading economists In the fall of 2008, fifteen of the world's leading economists—representing the broadest spectrum of economic opinion—gathered at New Hampshire's Squam Lake. Their goal: the mapping of a long-term plan for financial regulation reform. The Squam Lake Report distills the wealth of insights from the ongoing collaboration that began at these meetings and provides a revelatory, unified, and coherent voice for fixing our troubled and damaged financial markets. As an alternative to the patchwork solutions and ideologically charged proposals that have dominated other discussions, the Squam Lake group sets forth a clear nonpartisan plan of action to transform the regulation of financial markets—not just for the current climate—but for generations to come. Arguing that there has been a conflict between financial institutions and society, these diverse experts present sound and transparent prescriptions to reduce this divide. They look at the critical holes in the existing regulatory framework for handling complex financial institutions, retirement savings, and credit default swaps. They offer ideas for new financial instruments designed to recapitalize banks without burdening taxpayers. To lower the risk that large banks will fail, the authors call for higher capital requirements as well as a systemic regulator who is part of the central bank. They collectively analyze where the financial system has failed, and how these weak points should be overhauled. Combining an immense depth of academic, private sector, and public policy experience, The Squam Lake Report contains urgent recommendations that will positively influence everyone's financial well-being—all who care about the world's economic health need to pay attention.

Download or read book The Agency of CoCo written by Roman Goncharenko and published by . This book was released on 2018 with total page 41 pages. Available in PDF, EPUB and Kindle. Book excerpt: Most regulators grant contingent convertible bonds (CoCos) the status of equity. The theory, however, suggests that these securities can distort incentives via inducing debt overhang and risk shifting. In this paper, we therefore theoretically model how the degree of this distortion varies with bank risk. Our model predicts that riskier banks face higher debt overhang from CoCos. Next, analyzing a comprehensive database of CoCo issuance in Europe, we empirically test the predictions of our model. We find that banks with lower risk are more likely to issue CoCos than their riskier counterparts. Since in the current regulatory framework of Basel III banks are expected to raise equity prior to CoCo conversion, future debt overhang makes CoCos an expensive source of capital. Thus, riskier banks will opt for equity issuance over CoCos.

Download or read book Can Contingent Convertibles Help Private Asset Managers Fund Their Acquisition of Non Performing Loans from Portuguese Banks written by Mr.Andre O Santos and published by International Monetary Fund. This book was released on 2019-05-07 with total page 30 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper analyzes the capital structure of private asset managers in which the acquisition of nonperforming loans (NPLs) is funded with Contingent Convertibles (CoCos) placed with investors. The paper develops a model based on NPL transfer prices and residual recovery rates to assess capital structures consisting of CoCos and equity. The CoCos would contain put and call options to write down losses and write up profits, respectively, arising from liquidation and restructuring procedures. The paper concludes that the protection mechanism provided by debt write-downs embedded in CoCos and the incentives to investors provided by debt write-ups could help bridge the gap between Portuguese banks’ NPL bid prices and private equity firms’ ask prices.

Download or read book Bonds without Borders written by Chris O'Malley and published by John Wiley & Sons. This book was released on 2015-01-12 with total page 293 pages. Available in PDF, EPUB and Kindle. Book excerpt: Bonds without Borders tells the extraordinary story of how the market developed into the principal source of international finance for sovereign states, supranational agencies, financial institutions and companies around the world. Written by Chris O'Malley – a veteran practitioner and Eurobond market expert- this important resource describes the developments, the evolving market practices, the challenges and the innovations in the Eurobond market during its first half- century. Also, uniquely, the book recounts the development of security and banking regulations and their impact on the development of the international securities markets. In a corporate world crying out for financing, never has an understanding of the international bond markets and how they work been more important.Bonds without Bordersis therefore essential reading for those interested in economic development and preserving a free global market for capital.

Download or read book Financial Instruments with Characteristics of Equity written by and published by . This book was released on 2018 with total page 147 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book The Handbook of Convertible Bonds written by Jan De Spiegeleer and published by Wiley. This book was released on 2011-03-14 with total page 400 pages. Available in PDF, EPUB and Kindle. Book excerpt: This is a complete guide to the pricing and risk management of convertible bond portfolios. Convertible bonds can be complex because they have both equity and debt like features and new market entrants will usually find that they have either a knowledge of fixed income mathematics or of equity derivatives and therefore have no idea how to incorporate credit and equity together into their existing pricing tools. Part I of the book covers the impact that the 2008 credit crunch has had on the markets, it then shows how to build up a convertible bond and introduces the reader to the traditional convertible vocabulary of yield to put, premium, conversion ratio, delta, gamma, vega and parity. The market of stock borrowing and lending will also be covered in detail. Using an intuitive approach based on the Jensen inequality, the authors will also show the advantages of using a hybrid to add value - pre 2008, many investors labelled convertible bonds as 'investing with no downside', there are of course plenty of 2008 examples to prove that they were wrong. The authors then go onto give a complete explanation of the different features that can be embedded in convertible bond. Part II shows readers how to price convertibles. It covers the different parameters used in valuation models: credit spreads, volatility, interest rates and borrow fees and Maturity. Part III covers investment strategies for equity, fixed income and hedge fund investors and includes dynamic hedging and convertible arbitrage. Part IV explains the all important risk management part of the process in detail. This is a highly practical book, all products priced are real world examples and numerical examples are not limited to hypothetical convertibles. It is a must read for anyone wanting to safely get into this highly liquid, high return market.

Download or read book Bank Debt in Europe written by Mrs.Vanessa Le Lesle and published by International Monetary Fund. This book was released on 2012-12-20 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt: The crisis in Europe has underscored the vulnerability of European bank funding models compared to international peers. This paper studies the drivers behind this fragility and examines the future of bank funding, primarily wholesale, in Europe. We argue that cyclical and structural factors have altered the structure, cost, and composition of funding for European banks. The paper discusses the consequences of shifting funding patterns and investor preferences and presents possible policy options and bank actions to enhance European bank funding models’ robustness.

Download or read book Hybrid Financial Instruments written by Brian Coyle and published by Global Professional Publishi. This book was released on 2002 with total page 172 pages. Available in PDF, EPUB and Kindle. Book excerpt: From the "Risk Management" series, this is a concise and practical guide to financial instruments that are made up of two or more other instruments. The term "hybrid" has come to cover a wide range of financial products and this book seeks to explain the more commonly used ones. They are examined from the perspective of both ......