Discuss the benefits of using contingent convertible debt

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‘’Big banks on both sides of the Atlantic are weighing whether to follow Barclays as it pushes ahead with a plan to pay bonuses with innovative bonds, dubbed cocos. According to several banks present at last week’s world economic forum in davos the idea of using contingent convertibles notes as a renumeration tool in gaining ground. The financial times reported recently that pending regulatory approvals, Barclays aimed to unveil the coco bonus plan next month European regulators , particularly in Switzerland are fans of cocos instruments that convert into equity situations of financial crisis as a way to boost capital’’ source ft(2011). Banks keep close eye on barclays’ cocos plan, ft online Required: a. Distinguish different types of financial instruments that are used by companies faced with information asymmetry problems to finance their risk profile b. Discuss the benefits of using contingent convertible debt(cocos) otherwise known as reverse convertible debt to finance risk.

Reference no: EM132176748

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