AT1 investors are naked. Give them some CDS

By Graham Bippart
26 Aug 2014

The inchoate additional tier one asset class is highly complex and comes with many risks, and recent volatility shows it may also be prone to panic attacks. One way to help ensure it remains liquid, correctly priced and, most importantly, as stable as possible is to give investors the ability to accurately hedge their AT1 investments. But that doesn't seem likely any time soon.

The volatility seen in AT1 in July and August was almost certainly exacerbated by thin secondary trading, but for a moment it seemed to threaten to put a damper on further issuance in a product that is necessary in order for Europe’s banks to meet and maintain regulatory ...

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