What are contingent capital securities designed to do upon certain events?

Contingent capital securities are specifically designed to convert into equity under certain predefined events, particularly when a financial institution faces distress or meets certain regulatory thresholds. This conversion mechanism helps provide the institution with a buffer against losses by increasing its equity capital, thereby stabilizing its financial position and helping it to absorb shocks during times of crisis.

Such securities typically serve the purpose of enhancing the resilience of financial institutions, allowing them to maintain operations and protect depositors or stakeholders while reducing the risk of insolvency. The conversion into equity can also serve to align the interests of investors with those of the institution's long-term stability.

The other options describe characteristics not inherent to contingent capital securities. For instance, providing fixed interest payments pertains more to traditional debt instruments, while guaranteeing a return on investment contradicts the variable nature of these securities, as their performance is contingent on specific events. Similarly, the idea of remaining stable regardless of market conditions does not apply, since the value and nature of contingent capital securities can fluctuate based on the financial health of the issuing institution.