This paper develops a model of bank behavior that focuses on the interaction between the incentives created by fixed-rate deposit insurance and a bank's choice of its loan portfolio and its market-traded financial instruments. The model is used to analyze the consequences of the Federal Reserve...

This study analyzes alternative bank regulatory polices within a theoretical framework that can encompass many policy design issues. Consequences of generalizing banks' investment and financing opportunities for results in the existing literature are examined. Under costless equity issuance, a...

A valuation model is developed within an interest rate contingent claims framework to estimate NOW account and MMDA premiums and interest rate risk for a sample of commercial banks. As has been previously done, bank deposit rate and balances dynamics are represented by autoregressive processes...