A real options approach for evaluating the implementation of a risk-sensitive capital rule in banks
AbstractI evaluate a bank's incentives to implement a risk-sensitive regulatory capital rule. The decision making is analyzed within a real options framework where optimal policies are derived in terms of threshold levels of credit risk. I provide a numerical example for the implementation of internal ratings based models for credit risk (the IRB approach) under the new Basel Accord (Basel II).
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Bibliographic InfoArticle provided by Elsevier in its journal Review of Financial Economics.
Volume (Year): 18 (2009)
Issue (Month): 3 (August)
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Web page: http://www.elsevier.com/locate/inca/620170
Real options Capital structure Capital regulation Investment timing Basel II;
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