School of Business Talk - Prof. Yue-Kuen Kwok - Tuesday, May 16, 2017 | Hanlon Financial Systems Center

School of Business Talk - Prof. Yue-Kuen Kwok - Tuesday, May 16, 2017

School of Business Talk - Prof. Yue-Kuen Kwok - Tuesday, May 16, 2017

Event Location: 
Stevens Institute of Technology, Babbio 430
Event Time: 
Tuesday, May 16, 2017 - 4:00pm to 5:00pm

Prof. Yue-Kuen Kwok

Professor & Program Director,

BSc in Mathematics and Economics and MSc in Financial Mathematics

"Enhanced Equity-Credit Modeling for Contingent Convertibles"

 

Abstract:

Contingent convertibles are characterized by forced equity conversion under accounting trigger, which occurs when the capital ratio of the issuing bank falls below some contractual threshold. Also, under the point-of-non-viability trigger, the supervisory authority may enforce equity conversion when the financial health of the bank deteriorates to the distressed level. In this paper, we propose an equity-credit modeling of the joint process of the stock price and capital ratio that integrates both the structural approach of accounting trigger and reduced form approach of point-of-non-viability trigger of equity conversion. We also construct effective Fortet algorithms and finite difference schemes for numerical pricing of CoCo bonds under various forms of equity conversion payoff. The pricing properties of the CoCo bonds under various contractual specifications and market conditions are examined. This is a joint work with Tsz-Kin Chung of Tokyo Metropolitan University.

Biography:

Dr. Kwok is a Professor and Program Director for the MSc in Mathematics (Financial Mathematics and Statistics) in the Department of Mathematics at Hong Kong University of Science and Technology (HKUST). He holds a PhD and MSc in Applied Mathematics from Brown University and a BA degree in Engineering from Hong Kong University.