CoCo-obligationer i matematisk modelperspektivering

Abstract

This master’s thesis focuses on the issues that arises in the context of using Contingent Capital Bonds (CoCo bonds) in the capital structure of banks. Due to the global financial crisis, and especially the EU-areas way of handling it, this subject is currently growing increasingly popular at an almost exponential pace. Most global participants recognize the need of increased capital requirements for banks. This thesis examines whether part of that capital could be raised as CoCo bonds, and if they are means that can inject discipline in the financial sector, and lower the risks to society It is shown how CoCo bonds can be applied to lower risk shifting incentives and cost of bank faillure. Also, it shows the credit spread that should associated with the yield on CoCo bonds. The thesis validates the models used by implementation of existing CoCo bond issuances, and finds that even though the models might predict correctly a lot of factors influence the picture – blurring the models exact conclusions. Finally, the thesis uses the validated models to understand and evaluate experts presumptions of CoCo bonds and their effects.