Optimal bank interest margin under the FDIC’s surveillance : a constrained option-based model

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Title:	Optimal bank interest margin under the FDIC’s surveillance : a constrained option-based model
Authors:	Lin, Jyh-horng;Chen, Li-li
Contributors:	淡江大學國際貿易學系暨國際企業研究所
Date:	2003
Issue Date:	2009-11-30 18:20:33 (UTC+8)
Publisher:	New Delhi: TARU Publications
Abstract:	This paper examines the relationships between the Federal Deposit Insurance Corporation’s (FDIC’s) surveillance cost, optimal bank interest margin and deposit-amount determination. The framework utilized in this paper is the bank equity call option maximization subject to the put option of the FDIC’s risk-adjusted deposit insurance, explicitly considering surveillance cost. An increase in the FDIC’s surveillance cost results in an increased loan-rate setting and a reduced deposit-amount determination if the bank’s marginal market risky loans value is negative. Our findings provide an alternative explanation for the agency theory concerning a principal-agent issue of hidden action.
Relation:	Journal of statistics & management systems 6(3), pp.537-550
DOI:	10.1080/09720510.2003.10701098
Appears in Collections:	[Graduate Institute & Department of International Business] Journal Article

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