Agency Costs of A Bail-In And CoCo Bonds Risk

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Mark Melin
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A new study, “Agency Costs of a Bail-In,” points to a new “in-vogue” investment, “CoCo bonds,” or Contingent Convertible bonds, being marketed to institutions and high net worth individuals that, while appealing to yield hungry investors, might be masking risk – particularly if a bank were to fall prey to another financial crisis. Issues with the CoCo bonds The report, from Kenjiro Hori and Jorge Martin Ceron of the Birkebeck University in London, considers two issues with the CoCo bonds: wealth transfer and value destruction associated with an equity conversion or a write down.  Certain bonds, when converted under certain…

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Mark Melin is an alternative investment practitioner whose specialty is recognizing the impact of beta market environment on a technical trading strategy. A portfolio and industry consultant, wrote or edited three books including High Performance Managed Futures (Wiley 2010) and The Chicago Board of Trade’s Handbook of Futures and Options (McGraw-Hill 2008) and taught a course at Northwestern University's executive education program.

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