Pricing risky bank loans in the new Basel II environment
AbstractRecently, banking literature has had a quest for appropriate pricing of bank loans under the new Basel II rules and has been in pursuit of possible outcomes for undertaking such credit risk. In this paper, we propose a simplified formula to price bank’s corporate loans, aiming at making bank managers aware of the creation/destruction of shareholder value. We show that the mathematical treatability of the proposed formula and its easy feeding with internal and market inputs allow simple implementation by the final user.
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Bibliographic InfoPaper provided by Bank of Finland in its series Research Discussion Papers with number 3/2006.
Length: 49 pages
Date of creation: 18 Apr 2006
Date of revision:
Publication status: Published in Journal of Banking Regulation, 2006, pages 243-267.
Basel II; rating; pricing; exposure at default; EVA;
Find related papers by JEL classification:
- C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-10-21 (All new papers)
- NEP-BAN-2006-10-21 (Banking)
- NEP-FIN-2006-10-21 (Finance)
- NEP-FMK-2006-10-21 (Financial Markets)
- NEP-REG-2006-10-21 (Regulation)
- NEP-RMG-2006-10-21 (Risk Management)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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