Under the new Basel II regulatory framework, the need for an effective risk-adjusted pricing mechanism has become even more central in banking than in the past: banks are spurred to develop risk-adjusted measures, to avoid wasteful customers' cross-subsidization and support the value creation...

This paper detects how the Basel II internal ratings based (IRB) approach affects the bank loan pricing mechanism. A multi-period risk-adjusted pricing methodology under the prevalent loan repayment schemes based on the theoretical framework provided by Hasan and Zazzara (2006) is developed. In...