CoCos under short-term uncertainty
Mathematical Finance
2016-02-02 v1
Abstract
In this paper we analyze an extension of the Jeanblanc and Valchev (2005) model by considering a short-term uncertainty model with two noises. It is a combination of the ideas of Duffie and Lando (2001) and Jeanblanc and Valchev (2005): share quotations of the firm are available at the financial market, and these can be seen as noisy information about the fundamental value, or the firm's asset, from which a low level produces the credit event. We assume there are also reports of the firm, release times, where this short-term uncertainty disappears. This credit event model is used to describe conversion and default in a CoCo bond.
Cite
@article{arxiv.1602.00094,
title = {CoCos under short-term uncertainty},
author = {José Manuel Corcuera and Arturo Valdivia},
journal= {arXiv preprint arXiv:1602.00094},
year = {2016}
}