A measure of the basis between the spreads of CoCos (CoCo spread) and other risky securities from the same issuer. One of the measures is the basis over CDS spreads, i.e., the difference between CoCo spread and CDS spread:

CoCo basis= CoCo spread – CDS spread

As a basis measure, it allows traders and analysts to conduct relative value analysis between different securities and help detect mispricing opportunities in the market.

The widening of the CoCo basis for an issuer over a sell-off period would indicate the market’s concern for the risk associated with a CoCo issue (i.e., the so-called CoCo risk).