Getting the Most Out of a Mandatory Subordinated Debt Requirement
نویسندگان
چکیده
Recent advances in asset pricing|the reduced-form approach to pricing risky debt and derivatives|are used to quantitatively evaluate several proposals for mandatory bank issue of subordinated debt. We nd that credit spreads on both xed and oating rate subordinated debt provide relatively clean signals of bank risk and are not unduly in uenced by non-risk factors. Fixed rate debt with a put is unacceptable, but making the putable debt oating resolves most problems. Our approach also helps to clarify several di erent notions of \bank risk."
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Analysis of proposals for a minimum subordinated debt requirement
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