kaal:claim:1908473-023

A dual trigger that relies on a financial institution index gains from its use of market prices but is vulnerable to index manipulation and to bondholders attempting to force the institution into bankruptcy.

Source quote, verbatim

Although the strength of this proposal is its reliance on market prices, a disadvantage could be the index trigger, which could result in index manipulation or an attempt to force the entity into bankruptcy.

From

Wulf A. Kaal, Christoph Henkel, Contingent Capital with Sequential Triggers (2011), IV. SEQUENTIAL TRIGGERS AS PART OF THE EUROPEAN COMMISSION'S TARGETED APPROACH, p. 33
https://ssrn.com/abstract=1908473 · source PDF

Cite as

Wulf A. Kaal, Christoph Henkel, Contingent Capital with Sequential Triggers (2011). SSRN: https://ssrn.com/abstract=1908473

Holds when

Applies to dual price trigger designs that include a sector or system index component

Classification

failuresupport: arguedfailure: index-trigger-manipulationfamily: trigger-design-failurecontingent-capitaleconomics

Related claims

restated_by kaal:claim:2061166-033 Dual trigger proposals draw their central strength from reliance on market prices, but the index leg is a majo...

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