The study reviews equity valuation, and proposes an alternative equity valuation model based on a random process modelling of earnings and equity growth. A Markov process is used to model earnings, standardized as earnings to book value, and book value based on rating category. This assumes a...

This paper provides evidence for regulatory arbitrage within the class of asset-backed securities (ABS) based on individual asset holding data of German banks. I find that banks operating with tight regulatory constraints exploit the low risk-sensitivity of rating-contingent capital requirements...