The barrier options theory of corporate security valuation is applied to the contingent claims of a regulated bank. The regulator/insurer of the bank owns a down-and-in call option on the bank¡¯s assets which can be balanced against the expected coverage cost. This paper examines how the...

Increasing investment in human resource relative to information technology system in retail banking delivery channels increases the optimal bank interest margin and decreases the default risk in the bank¡¯s equity returns during a financial crisis. Raising the regulatory barrier inducing a...

We study the optimal bank interest margin and default risk under the capped ratio schedule of government capital instruments in the Basel III Capital Adequacy Accord and the Deposit Insurance Fund arrangement program. We show that an increase in the capped ratio (a decrease in the capped...

It is shown that the Fokker-Planck equations with linear drift γx and nonlinear drift γx + δx, i.e. the Rayleigh process, have exact symmetries on their own solution manifolds, the sl(2, R) ⊗ Weyl algebra and the sl(2, R) ⊗ I, respectively. The symmetries of these two types of processes...