Overview of an Alternative Trigger for Dcl

This research letter proposes an alternative trigger to the recently introduced Dynamic Control of Leverage (DCL). These instruments are similar to traditional CoCo bonds and are used to maintain a firm's leverage within pre-defined boundaries to ensure a low probability of default. Our proposed trigger preserves the desirable mean-reverting behaviour of the leverage dynamic while also reducing the latency between the trigger and the effective conversion. We provide evidence of the model's effectiveness and discuss the implications of its implementation