# Pricing sovereign contingent convertible debt

Source: [Pricing sovereign contingent convertible debt](<https://www.sota2.com/research/paper/68fa7cab1e209131cea8f1b6>)

Collection index: [llms.txt](<https://www.sota2.com/research/llms.txt>)

Data updated: 2025-10-26T06:05:59.268Z

Authors: Andrea Consiglio, Michele Tumminello, Stavros A. Zenios

Published: 2018-04-04T15:42:35.000Z

## Abstract

We develop a pricing model for Sovereign Contingent Convertible bonds (S-CoCo) with payment standstills triggered by a sovereign's Credit Default Swap (CDS) spread. We model CDS spread regime switching, which is prevalent during crises, as a hidden Markov process, coupled with a mean-reverting stochastic process of spread levels under fixed regimes, in order to obtain S-CoCo prices through simulation. The paper uses the pricing model in a Longstaff-Schwartz American option pricing framework to compute future state contingent S-CoCo prices for risk management. Dual trigger pricing is also discussed using the idiosyncratic CDS spread for the sovereign debt together with a broad market index. Numerical results are reported using S-CoCo designs for Greece, Italy and Germany with both the pricing and contingent pricing models.

## Recorded benchmark results

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## Original sources and implementation

[Original paper](<https://arxiv.org/abs/1804.01475>)

[PDF](<https://arxiv.org/pdf/1804.01475.pdf>)