Tsai, Jeng-Yan - In: Economic Modelling 29 (2012) 6, pp. 2190-2197
This paper examines the bank's optimal loan rate (and thus the bank's interest margin) under more stringent capital regulation when the bank is not only risk-averse but also regret-averse. Risk-averse preferences are characterized by an option-based utility function that includes disutility from...