Lin, Jyh-Horng; Lin, Jyh-Jiuan; Chang, Ching-Hui - In: Applied Economics Letters 19 (2012) 7, pp. 623-627
This article extends the framework of Merton (1974) with Vassalou and Xing (2004) to value a troubled but solvent bank's equity by explicitly incorporating distressed assets purchased by the government in an imperfectly competitive loan market. We show that the bank may be willing to take this...