In this paper we propose a new security, the Call Option Enhanced Reverse Convertible (COERC). The security is a form of contingent capital, i.e. a bond that converts to equity when the market value of equity or capital falls below a certain trigger. The conversion price is set significantly...

This paper introduces, analyzes, and values a new form of contingent convertible (CoCo), a Call Option Enhanced Reverse Convertible (COERC). Issued as a bond, it converts to new shareholders' equity if a bank's market value of capital falls below a pre-specified trigger. The COERC avoids the...

This paper presents a new approach that quantifies how a credit rating agency and investors judge the effects of collateral and various covenants on syndicated loan risk. It addresses firms’ self-selection of these contract terms by analyzing how a loan’s collateral and covenants affect: 1)...