Python Code, Jupyter Notebook & Guide

Contents

• CoCo Bonds - Python Source Code
• CoCo Bonds - Jupyter Notebook

Jupyter Notebook & Guide

This notebook provides a practical, hands-on guide to AT1 Contingent Convertible (CoCo) Bonds. It combines financial modelling theory with Python code to illustrate the pricing of these exotic hybrid instruments using advanced Monte Carlo simulation.

C++ Version

For a complimentary C++ version that can be run using a free online compiler, see https://onlinegdb.com/m62t3nbn6.

Notebook and Guide Objectives

The notebook and accompanying documentation are designed to help you:

• Understand the features, mechanics, and risks of AT1 CoCo Bonds, including conversion triggers and issuer call options.

• Learn how to model multiple risk factors using a 3-factor framework:
• Extended Hull–White for interest rates
• CIR model for credit/hazard rates
• Geometric Brownian Motion (GBM) for equity / CET1 ratio proxy

• Implement exact simulation Monte Carlo, correlating model drivers via Cholesky decomposition.

• Compute the Coco Bond PV, incorporating embedded issuer call and regulatory contingent options.

• Explore diagnostics and visualization: price convergence, path plots, and comparison against a vanilla fixed bond to understand exotic features.

Keywords:

• AT1 CoCo Bonds, Contingent Convertible Bonds, Monte Carlo Simulation, Hull–White, CIR Model, Equity Proxy, Exact Simulation, Cholesky Decomposition, Pricing, Yield Analysis, Embedded Options, Path-Dependent Instruments, Financial Risk.