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    Please use this identifier to cite or link to this item: https://tkuir.lib.tku.edu.tw/dspace/handle/987654321/19560

    Title: Bank as a liquidity provider and interest rate discovery: An option-based optimization
    Authors: Chang, Chuen-Ping;Lin, Jyh-horng
    Contributors: 淡江大學國際貿易學系
    Keywords: Liquidity;Price discovery;Black–Scholes valuation
    Date: 2006-08-01
    Issue Date: 2009-11-04 17:22:05 (UTC+8)
    Publisher: Elsevier
    Abstract: Lending via commitment provides liquidity and interest rate discovery. These two concepts are closely related, but they are not identical. As each function can influence asset prices (and thus equity capital prices), this paper discusses how liquidity enters into equity capital price formation, and then focuses on the impact of the price discovery process on bank interest rate behavior. We use an option-based model to study the average loan interest rate of the other banks (explicitly treated as interest rate discovery in our model), the degree of capital market imperfection, and the external financing need for determining the bank's optimal loan rate and loan commitment rate, and thus the default risk of its net return. We find, for example, that the default risk of the bank's net return is negatively related to the average loan rate of the other banks and the external financing need, and positively related to the degree of capital market imperfection. Our findings provide alternative explanations for implications concerning liquidity and price discovery.
    Relation: Expert Systems with Applications 31(2), pp.360-369
    DOI: 10.1016/j.eswa.2005.09.032
    Appears in Collections:[Graduate Institute & Department of International Business] Journal Article

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