The post crisis regulatory framework has fostered the development of the market for contingent convertible bonds (CoCos). These instruments allow for loss-absorption as a going concern but their critics warn about their potential destabilizing effects in stress situations. We analyse the...

CoCo's (contingent convertible capital) are designed to convert from debt to equity when banks need it most. Using a Diamond-Dybvig model cast in a global games framework, we show that while the CoCo conversion of the issuing bank may bring the bank back into compliance with capital...

This paper designs a systemic risk measure for the European banking system as a hypothetical distress insurance premium (DIP), which integrates economically the main characteristics of systemic risk — size, default probability, and interconnectedness. We further identify the individual...

Contingent convertible bonds (CoCos) issued by European global systemically important banks (GSIBs) as part of their total loss-absorbing capacity (TLAC) are meant to enhance financial stability by forcing investors to absorb losses when a bank is under stress. Coupon payments are made at...

This paper analyzes the contagion effects associated with the failure of Silicon Valley Bank (SVB) and identifies bank-specific vulnerabilities contributing to the subsequent declines in banks' stock returns. We find that uninsured deposits, unrealized losses in held-to-maturity securities, bank...

This paper analyzes the contagion effects associated with the failure of Silicon Valley Bank (SVB) and identifies bank-specific vulnerabilities contributing to the subsequent declines in banks' stock returns. We find that uninsured deposits, unrealized losses in held-to-maturity securities, bank...

We use days with tail sovereign CDS spread changes of peripheral countries to identify the effects of shocks to the cost of borrowing of these countries on stock returns of banks from other countries. We find that tail sovereign GIIPS CDS changes have an asymmetric impact in that bank stocks...