16655 Lecture Notes - Lecture 15: Yield Spread, Downside Risk, Call Option
Document Summary
Volatility has seen an increase in bank issuance spreads, flowing through to higher cost of funds. Regulatory impacts on cost of debt (the australian banking. Apra regulator) has increased the amount of capital banks need to hold against loans that they make. This has increased the overall cost of capital for banks, because their equity and other. Tier 1 capital is more expensive than debt. This has contributed to an overall increase in the credit margins that banks charge on loans that they make. Hybrids: hybrids can be structured to either look and feel more like debt or more like equity. Rating agencies and other analysts will look at the terms of each hybrid and assign an. What is the conversion price relative to the current equity price: holders of hybrid securities typically rank ahead of ordinary equity holders but behind secured and unsecured creditors of a company.
