LA VALORACIÓN DE LAS PARTICIPACIONES PREFERENTES/THE VALUATION OF PREFERRED SHARES

In Spain, the issue of so-called preferred shares hit record highs in the first decade of this century. These securities incorporate different interest rates options and they are really very complex in their valuation. This article provides a pricing methodology of preferred shares taking into accou...

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Bibliographic Details
Published in:Boletín de estudios económicos 2013-12, Vol.68 (210), p.543
Main Authors: Fernández, Prosper Lamothe, Somalo, Miguel Pérez
Format: Article
Language:Spanish
Subjects:
Banks
Fair value
Interest rates
Studies
Online Access:Get full text
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Summary:In Spain, the issue of so-called preferred shares hit record highs in the first decade of this century. These securities incorporate different interest rates options and they are really very complex in their valuation. This article provides a pricing methodology of preferred shares taking into account all financial elements within them. Beginning from the value of a perpetual bond, the model includes the different risks of these assets and the options embedded in them. The proposed model is applied to the issues made in Spain and it is verified that the issue price of the preferred shares are far from fair value obtained. This implies that banks acted illegally in the marketing of these securities. This fact is increasingly being noted by international financial organizations and Spanish courts. [PUBLICATION ABSTRACT]
ISSN:0006-6249