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Erschienen in:
2017 | OriginalPaper | Buchkapitel
A Kind of Investor-Friendly Dual-Trigger Contingent Convertible Bond
verfasst von : Wenhua Wang, Xuezhi Qin
Erschienen in: Knowledge and Systems Sciences
Verlag: Springer Singapore
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Abstract
If financial systemic crisis occurred, one of the effective countermeasures is to issue contingent securities like contingent convertible bonds (CoCos). In this paper, we present a new kind of CoCos which is of investor-friendly dual-trigger property, and it is called “Contingent Convertible bond after Converted” which can be put back at a discount price or converted into CoCos prior to an imminent financial systemic risk. We provided the design rule of this bond and a closed-form pricing formula under some assumptions, and this kind of bond is likely to be more powerful in loss absorbing capacity. Consequently, it is necessary to restrain investors’ option to put the CoCoCo back in order to keep loss absorbing capacity more powerful, meaning to limit the discount ratio \( \alpha \) less than 1.