This paper presents an optimal portfolio algorithm under equilibrium conditions to evaluate future cash flows. The Algorithm employs expected return-risk approximation of utility function and bivariate distribution of cash flows of an investment and returns on market portfolios. The proposed...

Banks provide risky loans to firms which have superior information regarding the quality of their projects. Due to asymmetric information the banks face the risk of adverse selection. Credit Value-at-Risk (CVaR) regulation counters the problem of low quality, i.e. high risk, loans and therefore...

We scrutinize the use of value at risk as traders' limit in banks. Thereby, we compare a bank with uninformed traders dealing on a perfect capital market, with a bank in which traders receive a noisy signal about the future price of the stock they are dealing in. Additionally, they are able to...