Handbook of Hybrid Instruments
Handbook of Hybrid Instruments

Author: Israel Nelken

Publisher: John Wiley & Sons

Published: 2000-07-26

Total Pages: 272

ISBN-13:

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An indispensable tool to steer readers thought the complex maze of hybrid instruments! Hybrid instruments - essentially bonds with an equity component - are found in a multitude of guises. This generic heading encompasses a seemingly endless array of financial instruments, including convertible bonds, mandatory convertibles, reverse convertibles, preferred shares, ELKS, DECS and Lyons. Within each one of these instruments are found a wide range of variations and features. These include reset, negative pledge, screw and forced conversion clauses, as well as step up coupons, call schedules, call options with soft and hard protection etc. The range of possibilities can seem bewildering, but it is this very flexibility which proves a huge attraction for investors, issuers and financial institutions. On the sell side companies issue these securities and corporate service departments advise on the type of options to include in them. On the buy side, investment managers seek to build portfolios with limited risk exposure using these securities and hedge funds utilise arbitrage opportunities between the convertible bond and the common share. The opportunities are endless but the seemingly labyrinthine complexities can prove daunting. The Handbook of Hybrid Instruments helps steer a clear path through the maze. Izzy Nelken has drawn together a team of experts to provide in-depth analysis of many of the key issues that both sellers and buyers require in order to operate effectively and profitably. A general introduction is followed by specific information on key clauses and variations, valuation methods, the impact on a firm's value following the public issuance of convertibles, details on when an issuer should call a convertible and the impact of these provisions on the price, the difficult requirement of input data to make sense of the models, indexes and reset convertibles. Finally, a highly useful glossary is provided of all the key terms used in this field. An analytical CD is also provided with the book, containing sample software of ConvB++. ConvB++ combines complex state of the art models with a simple, user friendly interface to assess fair values prices and to hedge parameters of hybrid instruments. The Handbook of Hybrid Instruments is an indispensable explanatory and analytical tool for all professionals looking for the latest thinking on convertibles from some of the world's leading experts.

The Impact of Basel Iii on Convertible Bonds - with Particular Emphasis on Contingent Convertible Bonds
The Impact of Basel Iii on Convertible Bonds - with Particular Emphasis on Contingent Convertible Bonds

Author: Timo Köffer

Publisher:

Published: 2013-10

Total Pages: 80

ISBN-13: 9783656523925

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Bachelor Thesis from the year 2013 in the subject Business economics - Banking, Stock Exchanges, Insurance, Accounting, grade: 2,3, University of Cooperative Education, language: English, abstract: Many banks contributed through their high-risk business models to the financial crisis in 2007. The financial crisis has shown that for a bank's solvency it is not only the amount of equity that is important, but also significantly the quality of equity. In particular hybrid capital was not used to a sufficient extent to absorb losses, although it is partially core capital under Basel II. Because of this the Basel Committee on Banking Supervision decided in December 2010 on new capital- and liquidity rules for banks (''Basel III framework''). The Basel III framework implemented the regulatory requirements to strengthen the financial system. In particular the qualitative requirements were raised for core capital. Under these new regulations core capital is crucial, because it can fully and immediately be claimed for losses. The old forms of hybrid capital will be recognized in regulatory capital to a lesser extent in the future. This has implications especially for subordinated bonds. The aim is to involve subordinated creditors and equity investors in the recovery phase in the cost of crisis management. The new capital requirements mean major structural changes for the banks, because the comparatively cheap hybrid capital must be replaced by capital of higher quality. A new form of hybrid capital have emerged, so called contingent convertible bonds(CoCos), a fixed-income security which is a capital buffer for a bank in financial distress and so could be attributed to regulatory equity capital. This hybrid capital is in the form of a mandatory convertible bond, which can contribute to making up for losses such as equity in the event of a crisis. In order to meet the new regulatory requirements, many banks are considering the advantages of CoCos. Therefore this thesis at