Huang, Fu-Wei; Chen, Shi; Tsai, Jeng-Yan - In: Journal of Financial Economic Policy 11 (2019) 2, pp. 158-173
Purpose: This paper aims to develop a barrier cap option model, i.e. a cap option model where default can occur at any time before the maturity date, to evaluate the equity and the default risk of a bank. The model implies the bank as a liquidity provider that one institution carriers out both...