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FINANCIAL MARKET COURSES

Contingent Convertibles (CoCos)

A CoCo is a bond which is automatically converted into equity when a predefined trigger point is breached, typically if where the issuer’s tier one capital falls below a pre-set limit. Many regulators and banks see CoCos as valuable regulatory capital buffers in the event of the issuer financial distress.

 

This course describes the key features of contingent convertibles and how these instruments are priced. The regulatory background and market development of CoCos are also outlined.

  • OBJECTIVES

    On completion of this course, you will be able to:

    Describe the key features of contingent convertible (Coco) bonds, including 'trigger' points and pricing mechanisms

    Outline the key regulatory issues associated with CoCos

  • COURSE OUTLINE

    Topic 1: CoCo Fundamentals

    What is a CoCo?

    CoCo Vs. Convertible Bonds

    Key Features of CoCos

    o Trigger

    • Accounting Trigger

    • Market-Bases Trigger

    • Regulatory Trigger

    • Multiple Trigger

    o Conversion Amount

    o Conversion Price

    o Coupon

    o Maturity

    o Funded Vs. Unfunded Structures

    Pricing a CoCo

    Investors in CoCos

    Early Issuers of CoCos

    Topic 2: Regulatory Issues

    CoCos and Regulatory Capital

    Regulatory Concerns

    CoCos- An Uncertain Future?

  • PREREQUISITE KNOWLEDGE

  • ESTIMATED COMPLETED TIME

    50 Minutes

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