How much are an unique type of bonds worth?

One of the hottest topics in the financial markets recently has been the ability of Deutsche Bank to meet the payments on its CoCo bonds, as evident by the coverage of the topic by Bloomberg. CoCo stands for contingent convertibles, a mixture between bonds and stocks. The contingent part means that the issuer may stop temporarily interest payments when it runs into trouble, or even deny them altogether by turning them into stocks (hence the convertibles part). Of course all this risk bear a higher return, but to learn how high it is according to a Bulgarian PhD student and risk practitioner, join this seminar at the Bulgarian Academy of Science!

When: February 12, 2016, 18.00
Where: Institute of Mathematics and Informatics, Bulgarian Academy of Sciences, room 403
WhoKrasimir Milanov (Finanalytica, PhD student at IMI)
Topic: “A complete CoCo bond pricing methodology”

Here is a short version of the abstract from SSRN:

The aim of the present research is to provide a new CoCo bond pricing method to assist analyses of both equity investors and fixed income investors. For this reason, we develop models in terms of PDEs where the spatial variable is the underlying stock. By using these approaches, one will be able to calculate delta, gamma, and any kind of duration and convexity for CoCo bonds including the callability feature. Two groups of approaches are developed. The first group is based on the primary market assumptions of Black-Scholes, and the second one involves credit risk modeling by means of jump to default stock dynamics. 

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