Keppo, Jussi; Kofman, Leonard; Meng, Xu - In: Journal of Economic Dynamics and Control 34 (2010) 10, pp. 2192-2214
We analyze a bank that operates under the Basel credit and market risk requirements, and that maximizes its value through recapitalizations, dividends, and liquid asset investments. According to our model, the market risk requirement may postpone recapitalization and this way increase the bank's...