The Determinants of European Coco Spreads
Sammanfattning
Contingent Convertible (Coco) bonds are hybrid capital securities that absorb losses when
the capital of the issuing bank falls below a certain level. Previous research has mainly
been focusing on the pricing of such instruments and this paper contributes to the eld
by empirically examining the determinants of Coco bond spreads for European banks. By
examining di erent samples, this study will search for di erences between Cocos with different
characteristics such as rating and regulatory capital designation. The sample covers
a set of 71 currently traded Cocos issued by listed European banks, accounting for over
30,000 panel observations. Firm speci c credit risk variables, initially identi ed by Merton
(1974), are found to explain the largest part of the variations in Coco spreads. Individual
bond liquidity and market wide variables are shown to complement the Merton variables
in explaining Coco spread movements.
Examinationsnivå
Master 2-years
Övrig beskrivning
MSc in Finance
Samlingar
Fil(er)
Datum
2016-09-21Författare
Hallden, Carl-Fredrik
Blomqvist, Blomqvist
Nyckelord
Contingent Convertible bonds
Cocos
Coco spreads
Hybrid Securities
Basel III
Additional Tier 1
Tier 2
Banks
Serie/rapportnr.
2016:121
Master Degree Project
Språk
eng