Richmond Fed paper examines triggers for contingent capital conversion
Working paper sees link between desirability of different triggers and ‘conversion rule’
Whether a regulator or fixed-price mechanism is more suitable for triggering the conversion of debt into equity depends on the ‘conversion rule', new research published by the Federal Reserve Bank of Richmond finds.
In the working paper, Fixed Prices and Regulatory Discretion as Triggers for Contingent Capital Conversion: An Experimental Examination, Douglas Davis and Edward Prescott define the conversion rule as "the effect of the conversion on the value of equity to incumbent equity owners".
"
Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.
To access these options, along with all other subscription benefits, please contact info@centralbanking.com or view our subscription options here: http://subscriptions.centralbanking.com/subscribe
You are currently unable to print this content. Please contact info@centralbanking.com to find out more.
You are currently unable to copy this content. Please contact info@centralbanking.com to find out more.
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Printing this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@centralbanking.com
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Copying this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@centralbanking.com
More on Financial Stability
The American way: a stress-test substitute for Basel’s IRRBB?
Bankers divided over new CCAR scenario designed to bridge supervisory gap exposed by SVB failure
Banks’ AI models are flawed – Basel Committee chair
Pablo Hernández de Cos says risk of AI model misspecification is “incredibly high”
FSB proposes actions to make margin calls safer
Margin calls can mitigate risk but may also create spikes of liquidity demand, report says
Vietnam’s central bank lends $24 billion to troubled bank
State Bank of Vietnam offering liquidity lifeline to lender mired in financial scandal, Reuters reports
‘Stretched’ bond markets vulnerable to instability – IMF
Expectations of soft landing have compressed spreads and could lead to sudden repricing, report says
Central banks need caution in easing policy, IMF says
World Economic Outlook says most indicators still point to soft landing
CBDCs could increase financial instability, Fed paper says
Central banks should consider price and quantity tools to mitigate risks, researchers say
Pakistan repays bonds worth $1bn as it seeks fresh IMF loan
Debt-stricken country looks to secure about $6 billion in loans