We propose a valuation model for a bank which faces a bankruptcy risk. Banks are identified with a possibly infinite random sequence of net benefits. A bank is solvent as long as its benefits remain non-negative. To preserve distressed banks from destruction, banks will be pooled within a...

This paper provides an analysis of screening contracts in a complete but imperfect information environment as opposed tothe usual incomplete information (Bayesian) environment. An agent faces a hold-up situation while making a cost-reducing specific investment that is not observed by the...