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 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 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 The Pricing of already issued Contingent Convertible Bonds CoCo Bonds written by Melanie Prossliner and published by GRIN Verlag. This book was released on 2013-01-08 with total page 29 pages. Available in PDF, EPUB and Kindle. Book excerpt: Seminar paper from the year 2011 in the subject Business economics - Banking, Stock Exchanges, Insurance, Accounting, grade: 1,2, University of Innsbruck (Banking and Finance), course: Risk Management, language: English, abstract: In the year 2007 one of the biggest financial crisis in worlds history has begun. It leads to the bankruptcy of huge financial institution followed by the bailout of banks through the national government and a downturn in worldwide stock markets. The financial crisis has also shown that the capitalizations of numerous financial institutes were not adequate and several components of banks equity could not fulfil their planned function. To save the global financial system from collapsing many banks received lot of money from the government. To avoid another future crisis and huge bailouts by the national government, some financial experts and leading economists proposed a new financial instrument, called Contingent Convertibles Bonds (“CoCo-Bonds”). They are considered to be an opportunity to improve the equity base of banks in times of crisis. CoCo-Bonds are a special form of bonds, which convert automatically to equity after a predefined incidence. Three large banks have already issued these new financial instruments; The Lloyds Banking Group (2009), Rabobank (2010) and the Credit Suisse (2011). The aim of this paper is to analyse the structure and the pricing of these already issued CoCo- Bonds. In the first part the functionality of the CoCo-Bonds will be explained. It will also provide a summary of the specification of the already issued CoCo-Bonds. The third part, which is the main part, is focused on the pricing modalities of these new financial instruments. Two different approaches will be considered. First the credit derivatives approach and seconds the equity derivatives approach. In the end of the paper both approaches will be applied to the already issued CoCo-Bonds of Lloyds and Credit Suisse.

Download or read book Convertible Bonds and Bank Risk taking written by Natalya Martynova and published by . This book was released on 2018 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We study how contingent capital affects banks' risk choices. When triggered in highly levered states, going-concern conversion reduces risk-taking incentives, unlike conversion at default by traditional bail-inable debt. Interestingly, contingent capital (CoCo) may be less risky than bail-inable debt as its lower priority is compensated by a lower induced risk. The main beneficial effect on risk incentives comes from reduced leverage upon conversion, while any equity dilution has the opposite effect. This is in contrast to traditional convertible debt, since CoCo bondholders have a short option position. As a result, principal write-down CoCo debt is most desirable for risk preventive pur- poses, although the effect may be tempered by a higher yield. The risk reduction effect of CoCo debt depends critically on the informativeness of the trigger. As it should ensure deleveraging in all states with high risk incentives, it is always inferior to pure equity.

Download or read book Advances in Credit Risk Modeling and Management written by Frédéric Vrins and published by MDPI. This book was released on 2020-07-01 with total page 190 pages. Available in PDF, EPUB and Kindle. Book excerpt: Credit risk remains one of the major risks faced by most financial and credit institutions. It is deeply connected to the real economy due to the systemic nature of some banks, but also because well-managed lending facilities are key for wealth creation and technological innovation. This book is a collection of innovative papers in the field of credit risk management. Besides the probability of default (PD), the major driver of credit risk is the loss given default (LGD). In spite of its central importance, LGD modeling remains largely unexplored in the academic literature. This book proposes three contributions in the field. Ye & Bellotti exploit a large private dataset featuring non-performing loans to design a beta mixture model. Their model can be used to improve recovery rate forecasts and, therefore, to enhance capital requirement mechanisms. François uses instead the price of defaultable instruments to infer the determinants of market-implied recovery rates and finds that macroeconomic and long-term issuer specific factors are the main determinants of market-implied LGDs. Cheng & Cirillo address the problem of modeling the dependency between PD and LGD using an original, urn-based statistical model. Fadina & Schmidt propose an improvement of intensity-based default models by accounting for ambiguity around both the intensity process and the recovery rate. Another topic deserving more attention is trade credit, which consists of the supplier providing credit facilities to his customers. Whereas this is likely to stimulate exchanges in general, it also magnifies credit risk. This is a difficult problem that remains largely unexplored. Kanapickiene & Spicas propose a simple but yet practical model to assess trade credit risk associated with SMEs and microenterprises operating in Lithuania. Another topical area in credit risk is counterparty risk and all other adjustments (such as liquidity and capital adjustments), known as XVA. Chataignier & Crépey propose a genetic algorithm to compress CVA and to obtain affordable incremental figures. Anagnostou & Kandhai introduce a hidden Markov model to simulate exchange rate scenarios for counterparty risk. Eventually, Boursicot et al. analyzes CoCo bonds, and find that they reduce the total cost of debt, which is positive for shareholders. In a nutshell, all the featured papers contribute to shedding light on various aspects of credit risk management that have, so far, largely remained unexplored.

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 224 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 The Handbook of Convertible Bonds written by Jan De Spiegeleer and published by . This book was released on 2011 with total page 378 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 co.

Download or read book Contingent Convertibles CoCos written by George M. Von Furstenberg and published by World Scientific Publishing Company Incorporated. This book was released on 2014-08-12 with total page 270 pages. Available in PDF, EPUB and Kindle. Book excerpt: Climate effects on agriculture are of increasing concern in both the scientific and policy communities because of the growing population and the greater uncertainty in the weather during growing seasons. Changes in production are directly linked to variations in temperature and precipitation during the growing season and often to the offseason changes in weather because of soil water storage to replenish the soil profile. This is not an isolated problem but one of worldwide interest because each country has concerns about their food security.The Agricultural Model Intercomparison and Improvement Project (AgMIP) was developed to evaluate agricultural models and intercompare their ability to predict climate impacts. In sub-Saharan Africa and South Asia, South America and East Asia, AgMIP regional research teams (RRTs) are conducting integrated assessments to improve understanding of agricultural impacts of climate change (including biophysical and economic impacts) at national and regional scales. Other AgMIP initiatives include global gridded modeling, data and information technology (IT) tool development, simulation of crop pests and diseases, site-based crop-climate sensitivity studies, and aggregation and scaling.

Download or read book Coco Bonds as a Method of Equity Boost written by Philipp Rothe and published by GRIN Verlag. This book was released on 2023-08-04 with total page 17 pages. Available in PDF, EPUB and Kindle. Book excerpt: Academic Paper from the year 2021 in the subject Business economics - Investment and Finance, grade: 1,7, International School Of Management, Campus Frankfurt, language: English, abstract: This term paper will start with describing some basic characteristics of Coco-Bonds and their market behaviour. This first chapter should help to understand the product itself and its features. Afterwards the basic idea behind Basel III and resulting regulations under CRD and CRR are described and linked to Coco-Bonds as a product. In the last chapter it is discussed whether and under which circumstances Coco-Bonds belong to the equity capital of a bank and thus strengthen the equity base. After the financial crisis in 2008 one of the main objectives the regulatory- and supervisory authority had, was to strengthen and increase the equity base of banks. This should ensure a better preparation for coming crises. In October 2011 the Basel Committee set the stage for a financial product, allowing it to play a ma-jor role in building up regulatory equity capital, as defined in Basel III. The product to reach the regulatory requirements are Contingent Convertible Bonds (short: Coco-Bonds). These bonds are a niche financial product which, as a result of the increasing regulatory requirements, in recent years were often issued by banks. Although these securities are issued as a bond with a fixed coupon, in case of a certain event, the Coco-Bonds are converted into equity or are written off. Due to this, Coco-Bonds often pay a high coupon rate, which could make them, especially within the currently low interest rate environment, look like an attractive investment. However a high coupon payment always means a related risk.

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 Risk Management written by Hongmu Lee and published by Springer Nature. This book was released on 2021-11-25 with total page 261 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book outlines risk management theory systematically and comprehensively while distinguishing it from academic fields such as insurance theory. In addition, the book builds a risk financing theory that is independent of insurance theory. Until now, risk management (RM) theory has been discussed while the framework of the theory has remained unclear. However, this book, unlike previous books of this type, provides risk management theory after presenting a framework for it. Enterprise risk management (ERM) is seen differently depending on one’s position. For accountants, it is a means for internal control to prevent accounting fraud, whereas for financial institutions, it quantifies the risk that administrators can take to meet supervisory standards. Therefore, most of the ERM outlines are written to suit the intended uses or topics, with no systematic RM overviews. This book discusses a systematic RM theory linked to the framework of it, unlike previous books that were written according to topic. After the Enron scandal in December 2001 and WorldCom accounting fraud in June 2002, several laws were enacted or revised throughout the world, such as the SOX Act(Sarbanes-Oxley Act) in the United States and the Financial Instruments and Exchange Law and Companies Act in Japan. In this process, the COSO(Committee of Sponsoring Organizations of Treadway Commission) published their ERM framework, while the ISO (International Organization for Standardization) published their RM framework. The author believes that the competition between these frameworks was an opportunity to systematize RM theory and greatly develop it as an independent discipline from insurance. On the other hand, the Great East Japan Earthquake that occurred on March 11, 2011, caused enormous losses. Also, because pandemics and cyber risks are increasing, businesses must have a comprehensive and systematic ERM for these risks associated with their business activities

Download or read book Capital Adequacy Beyond Basel written by Hal S. Scott and published by Oxford University Press on Demand. 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 Convertible Bonds and Bank Risk taking written by Enrico Perotti and published by . This book was released on 2015 with total page 38 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Risk Management and Financial Institutions written by John C. Hull and published by John Wiley & Sons. This book was released on 2018-03-13 with total page 832 pages. Available in PDF, EPUB and Kindle. Book excerpt: The most complete, up-to-date guide to risk management in finance Risk Management and Financial Institutions, Fifth Edition explains all aspects of financial risk and financial institution regulation, helping you better understand the financial markets—and their potential dangers. Inside, you’ll learn the different types of risk, how and where they appear in different types of institutions, and how the regulatory structure of each institution affects risk management practices. Comprehensive ancillary materials include software, practice questions, and all necessary teaching supplements, facilitating more complete understanding and providing an ultimate learning resource. All financial professionals need to understand and quantify the risks associated with their decisions. This book provides a complete guide to risk management with the most up to date information. • Understand how risk affects different types of financial institutions • Learn the different types of risk and how they are managed • Study the most current regulatory issues that deal with risk • Get the help you need, whether you’re a student or a professional Risk management has become increasingly important in recent years and a deep understanding is essential for anyone working in the finance industry; today, risk management is part of everyone's job. For complete information and comprehensive coverage of the latest industry issues and practices, Risk Management and Financial Institutions, Fifth Edition is an informative, authoritative guide.

Download or read book Global Credit Review written by Risk Management Institute and published by World Scientific. This book was released on 2013 with total page 195 pages. Available in PDF, EPUB and Kindle. Book excerpt: This annual publication provides an overview of the most important developments in global credit markets and the regulatory landscape. It covers theoretical and empirical research on credit ratings and credit risk, and reports on recent findings and evolutions of the Risk Management Institute's Credit Research Initiative. The ultimate objective of this publication is to advance the state of research and development in the critical area of credit risk and rating systems. With a distinctive focus on topics related to credit markets and credit risk, this publication will be useful to finance professionals, policy makers and academics with an interest in credit markets.

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