Related papers: CoCo Bonds Valuation with Equity- and Credit-Calib…
Contingent Convertible bonds (CoCos) are debt instruments that convert into equity or are written down in times of distress. Existing pricing models assume conversion triggers based on market prices and on the assumption that markets can…
This paper investigates whether a financial system can be made more stable if financial institutions share risk by exchanging contingent convertible (CoCo) debt obligations. The question is framed in a financial network model of debt and…
In the present paper we fill an essential gap in the Convertible Bonds pricing world by deriving a Binary Tree based model for valuation subject to credit risk. This model belongs to the framework known as Equity to Credit Risk. We show…
We study the role of contingent convertible bonds (CoCos) in a complex network of interconnected banks. By studying the system's phase transitions, we reveal that the structure of the interbank network is of fundamental importance for the…
Pricing composite and quanto contracts requires a joint model of both the underlying asset and the exchange rate. In this contribution, we explore the potential of local-correlation models to address the challenges of calibrating synthetic…
Within the context of the banking-related literature on contingent convertible bonds, we comprehensively formalise the design and features of a relatively new type of insurance-linked security, called a contingent convertible catastrophe…
We propose an option approach for pricing bond illiquidity that is reminiscent of the celebrated work of Longstaff (1995) on the non-marketability of some non-dividend-paying shares in IPOs. This approach describes a quite common situation…
Collateralized debt obligation (CDO) has been one of the most commonly used structured financial products and is intensively studied in quantitative finance. By setting the asset pool into different tranches, it effectively works out and…
Emerging market hard-currency bonds are an asset class of growing importance, and contain exposure to an EM sovereign and the underlying industry. The authors investigate how to model this as a modification of the well-known…
Cost-of-capital valuation is a well-established approach to the valuation of liabilities and is one of the cornerstones of current regulatory frameworks for the insurance industry. Standard cost-of-capital considerations typically rely on…
We tackle the problem of pricing Chinese convertible bonds(CCBs) using Monte Carlo simulation and dynamic programming. At each exercise time, we use the state variables of the underlying stock to regress the continuation value, and apply…
This paper studies existence and uniqueness of equilibrium prices in a model of the banking sector in which banks trade contingent convertible bonds with stock price triggers among each other. This type of financial product was proposed as…
Recent studies document strong empirical support for multifactor models that aim to explain the cross-sectional variation in corporate bond expected excess returns. We revisit these findings and provide evidence that common factor pricing…
Pricing formulae for defaultable corporate bonds with discrete coupons under consideration of the government taxes in the united model of structural and reduced form models are provided. The aim of this paper is to generalize the…
This paper introduces a novel multidimensional insurance-linked instrument: a contingent convertible bond (CoCoCat bond) whose conversion trigger is activated by predefined natural catastrophes across multiple geographical regions. We…
We propose a unifying framework for the pricing of debt securities under general time-inhomogeneous short-rate diffusion processes. The pricing of bonds, bond options, callable/putable bonds, and convertible bonds (CBs) is covered. Using…
We propose a model which can be jointly calibrated to the corporate bond term structure and equity option volatility surface of the same company. Our purpose is to obtain explicit bond and equity option pricing formulas that can be…
This article describes and explores taxes and debt in finance. Here a situation is thought about, where tax payments would qualify to be considered as debt. Using this principle we can infer that it is possible to create and price a type of…
This paper investigates the callable convertible bond problem in the presence of a liquidity constraint modelled by Poisson signals. We assume that neither the bondholder nor the firm has absolute priority when they stop the game…
We develop a pricing model for Sovereign Contingent Convertible bonds (S-CoCo) with payment standstills triggered by a sovereign's Credit Default Swap (CDS) spread. We model CDS spread regime switching, which is prevalent during crises, as…