Abstract
AbstractWe conduct a comprehensive pricing study of additional tier 1 (AT1) contingent convertible (CoCo) bonds issued by Eurozone banks. By accounting for an extensive set of pricing determinants related to the regulatory framework, the security design and key market variables, we show that the regulatory concept of the maximum distributable amount (MDA) introduced in 2016 has a significant and economically meaningful impact on CoCo spreads. Furthermore, we examine whether the market stress induced by the COVID‐19 pandemic influences the determinants of CoCo spreads. Our results show that the pricing factors remain stable throughout tranquil and volatile periods.
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