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Toward a theory of bank loan commitments

  • Thakor, Anjan V.

The characteristics of fixed and variable rate bank loan commitments are analyzed in a contingent-claims framework, and valuation expressions are derived for these commitments. The valuation expressions are used to present estimates of the impact of interest rate uncertainty on the liability assumed by a bank issuing loan commitments. Finally, a simple, two-period, asymmetric information model is employed to explain the recent trend among bankers to substitute variable rate commitments for their fixed rate counterparts.

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Article provided by Elsevier in its journal Journal of Banking & Finance.

Volume (Year): 6 (1982)
Issue (Month): 1 (March)
Pages: 55-83

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Handle: RePEc:eee:jbfina:v:6:y:1982:i:1:p:55-83
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  1. Black, Fischer & Scholes, Myron S, 1973. "The Pricing of Options and Corporate Liabilities," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 637-54, May-June.
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  8. Campbell, Tim S, 1978. "A Model of the Market for Lines of Credit," Journal of Finance, American Finance Association, vol. 33(1), pages 231-44, March.
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  11. Niehans, Jurg & Hewson, John, 1976. "The Eurodollar Market and Monetary Theory," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 8(1), pages 1-27, February.
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