Contingent Capital Explained (Part 2) by Jan De Spiegeleer

Presenter: Jan De Spiegeleer: Head of Risk Management , Jabre Capital Partners

About the course:

The course takes a very pragmatic and practical approach and employs a lot of numerical examples. The financial landscape went since 2010 through one of the biggest regulatory overhauls ever: Basel III, the Swiss-finish, CRD4 and the ICB-Vickers report all have made statements about the concept of contingent capital. The course covers and describes the construction of CoCos (Contingent Convertibles) in the light of these latest reforms. Furthermore, the course goes extensively into the price setting question of CoCos and the related dynamics. We provide insight in rule of thumbs pricing and elaborate on more advanced methods. The pricing theory is applied and illustrated with the Lloyds and Credit Suisse CoCos. Practical examples and market data is used throughout the course. Furthermore, the delegates will be guided through a hands-on explanation with numerical examples of the dynamics of CoCos. Potential effects of the death-spiral are discussed. The course is a must for all financial professionals and sheds a light on the intricacies of contingent capital from the structuring, pricing,hedging and regulatory point of view.

Contingent Capital Explained (Part 2)

Bail-In Capital

  • Definition
  • Examples
  • Case study :Bail-In mechanisms in Europe

                 Denmark
                 Lehman Brothers

CoCo Dynamics

  • Comparison with Convertible Bonds
  • Factor Analysis
  • Sensitivity Analysis
  • Vega Profile

CoCos with upside potential

  • CoCoCo bond
  • Case Study

Death Spiral

  • Example of Reset convertibles
  • Case study

Quantitative Aspects of CoCos

  • Pricing CoCos in Jump-Diffusion
  • Introducing CEV
  • Multi-Factor Pricing