A Study of Contingent Convertible Bond and Default Premium: The Case of Barclays Bank in 2012
Date Issued
2014
Date
2014
Author(s)
Tai, Yi-Lin
Abstract
Since 2008, the outburst of global financial crisis have made the Basel Committee on Banking Supervision publish so called basel 3 agreement which require banks'' capital have the loss absorption mechanism. Under this Accord, an new financial instrument, Contingent Convertible(CoCo) Bond, have launched. This paper introduce the evolution of supervision on capital adequacy ratio and the overview CoCo Bond market. In terms of priority of payment in liquidation, CoCo Bond is subordinated to debt but prior to equity; thus the bank or financial institution who issued CoCo shall reduce it default probability. Besides, due to its loss absorption mechanism and illiquidity, CoCo Bond shall have higher risk premium compared to corporate bond. This paper follow Longstaff, Mithal, and Neis (2005)''s model to examine the hypothesis mentioned above.
Subjects
巴塞爾資本協定
資本適足率
應急強迫轉換債
違約風險溢酬
Type
thesis
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