@article{(Open Science Index):https://publications.waset.org/pdf/7141, title = {Bail-in Capital: The New Box}, author = {Manu Krishnan and Phil Jacoby}, country = {}, institution = {}, abstract = {In this paper, we discuss the paradigm shift in bank capital from the “gone concern" to the “going concern" mindset. We then propose a methodology for pricing a product of this shift called Contingent Capital Notes (“CoCos"). The Merton Model can determine a price for credit risk by using the firm-s equity value as a call option on those assets. Our pricing methodology for CoCos also uses the credit spread implied by the Merton Model in a subsequent derivative form created by John Hull et al . Here, a market implied asset volatility is calculated by using observed market CDS spreads. This implied asset volatility is then used to estimate the probability of triggering a predetermined “contingency event" given the distanceto- trigger (DTT). The paper then investigates the effect of varying DTTs and recovery assumptions on the CoCo yield. We conclude with an investment rationale.}, journal = {International Journal of Economics and Management Engineering}, volume = {6}, number = {1}, year = {2012}, pages = {88 - 92}, ee = {https://publications.waset.org/pdf/7141}, url = {https://publications.waset.org/vol/61}, bibsource = {https://publications.waset.org/}, issn = {eISSN: 1307-6892}, publisher = {World Academy of Science, Engineering and Technology}, index = {Open Science Index 61, 2012}, }