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financial crisis of 2007–2009, two important issues require further attention. First, although bank capital ratios have been … system. Second, bank liquidity requirements may have become too complex and could also have unintented and unpredictable … interaction effects with bank capital requirements. …
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We propose a methodology for measuring the market-implied capital of banks by subtracting from the market value of equity (market capitalization) a credit-spread-based correction for the value of shareholders' default option. We show that without such a correction, the estimated impact of a...
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