Δεν διατίθεται στα ελληνικά.
Ricardo Correia
- 12 January 2026
- WORKING PAPER SERIES - No. 3170Details
- Abstract
- This paper develops a model of AT1 CoCos and corporate securities analysing the role of CoCos as replacements of Equity or of Debt. Our results show that, in terms of value creation, CoCos perform better when they replace vanilla corporate debt rather than when they replace common Equity. Moreover, we show as well that although debt increases the probability of bankruptcy, given the coupon suspension possibility, with CoCos the probability of financial distress is higher. Our paper also highlights the considerable complexity of this instrument, something at odds with its role as a potential solution to a financial crisis in part triggered by less complex securities.
- JEL Code
- K22 : Law and Economics→Regulation and Business Law→Business and Securities Law
G01 : Financial Economics→General→Financial Crises
G13 : Financial Economics→General Financial Markets→Contingent Pricing, Futures Pricing
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
G33 : Financial Economics→Corporate Finance and Governance→Bankruptcy, Liquidation
- 13 November 2017
- WORKING PAPER SERIES - No. 2110Details
- Abstract
- In this paper, we construct a structural model to determine the costs of a bank rescue considering bail-outs and bail-ins. In our model, a government assumes the equity stake under unlimited liability upon abandonment of the original equity holders. The model determines an abandonment trigger such that if total income drops below this trigger, private shareholders abandon the bank. Given this trigger, the model also determines the bank rescue costs, the expected time to the bank rescue and the bank rescue probabilities. A static analysis of our model produces several empirically testable hypotheses. The model was explored in a sample of southern European countries considering alternative assumptions regarding parameter estimates and the behavior of operational costs. The model results regarding the rescue costs are reasonable, but the model also predicts bank rescues, estimates equity values, performs welfare analyses and estimates the impact of different macro- and micro-prudential policies. The empirical exercise we present, highlights the importance of the assumptions made regarding the behavior of the operational costs by showing dramatic differences in results in a sample of countries that otherwise appear to share important cultural and geographical proximities.
- JEL Code
- G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
G28 : Financial Economics→Financial Institutions and Services→Government Policy and Regulation
H81 : Public Economics→Miscellaneous Issues→Governmental Loans, Loan Guarantees, Credits, Grants, Bailouts