The paper focuses on the interaction between the solvency probability of a banking firm and the diversification potential of its asset portfolio when determining optimal equity capital. The purpose of this paper is to incorporate value at risk (VaR) into the firm-theoretical model of a banking...

According to many authors, so-called “central planning” had disappeared from European countries by 1989. However, this is by no means certain. Many former centrally planned economies still engage in central planning, in both the private and public sectors. Moreover, there is a striking...

Banks make profits from the difference between short-term and long-term loan interest rates. To issue loans, banks raise funds from capital markets. Since the long-term loan rate is relatively stable, but short-term interest is usually variable, there is an interest rate risk. Therefore, banks...